Via Bloomie:
While much of the world was under stay-at-home orders on the first day of 2021, Chinese moviegoers packed into cinemas to watch the romantic comedy Warm Hug and the drama A Little Red Flower, generating the country’s biggest New Year’s box office on record. The 545 million-yuan ($84 million) splashed out on movie tickets was the latest sign that household spending in China is above pre-pandemic levels, mainly thanks to the country’s effective suppression of the coronavirus’s spread.
That’s good news for China’s economy, as consumption has accounted for the bulk of growth in recent years, and for companies such as Nike Inc., which reported its China sales soared 24%, to $2.3 billion, in the most recent quarter—the first time they’ve topped $2 billion.
Shifting the economy away from investment in housing and industry and toward consumer demand is a key objective for China’s leadership, as it continues to tweak the development model to deliver continued growth, though with not as much debt. President Xi Jinping introduced the term “dual circulation” last year, signaling a renewed push to build a stronger domestic market to insulate China from the threat of rising global protectionism. In December the top leadership of the Chinese Communist Party used the phrase “demand-side reform” for the first time, confirming that policies geared toward allocating a greater share of national income to households will be a priority in the Five-Year Plan that runs from 2021 to 2025.
Whatevs. For reality, try Micheal Pettis:
1/16
It is a little frustrating to see the response many analysts had to the GDP growth data Chinese released today. These numbers aren’t especially good, and they certainly shouldn’t have been surprising. Back in April and May, when most analysts…https://t.co/3bWjc5oEN2
— Michael Pettis (@michaelxpettis) January 18, 2021
3/16
I know? Because I knew that while most of the healthy sources of Chinese growth would contract (except for exports, which would expand given Beijing’s intense supply-side response to the impact of Covid-19), Beijing was going to respond to a significant…
— Michael Pettis (@michaelxpettis) January 18, 2021
5/16
needed for domestic political ends.
And that’s exactly what happened. While GDP grew by 6.5% in the fourth quarter, even with substantial tailwinds its retail sales measure – a proxy for consumption – was only up 4.6%, and it was down 3.9% overall in 2020.
— Michael Pettis (@michaelxpettis) January 18, 2021
7/16
by 3-4 percentage points this year, driving it almost back to its nadir in 2010-11. There is no way that this can be seen as good news, and is confirmed by the fact that while exports were up 3.6% in 2020, imports were down 1.1%. By the way those who say China’s trade…
— Michael Pettis (@michaelxpettis) January 18, 2021
9/16
promise that “external circulation” would be used to shift the Chinese economy towards “internal circulation”, what actually happened was a huge shift from internal to external circulation.
That isn’t what anyone wanted, and the fact that more than 100% of…
— Michael Pettis (@michaelxpettis) January 18, 2021
11/16
rising by 25 percentage points, roughly 3-4 times its previous year’s increase. Second, that its trade surplus must soar, putting huge pressure on the rest of the world, and of course that happened too.
This means that China must reverse the consequence of 2020 as…
— Michael Pettis (@michaelxpettis) January 18, 2021
13/16
with 6-7% GDP growth or whether the authorities will demand more. If the former, the debt ratio should remain flat.
But without a serious – and politically difficult – push by Beijing, it isn’t clear that household income growth will even keep up with GDP growth…
— Michael Pettis (@michaelxpettis) January 18, 2021
15/16
It performed badly, like the rest of the world, and it is only because Beijing sharply increased all the things it has been trying to rein in that the GDP measure was able to rise. That’s like saying that if I can run faster after smoking a big bowl of crystal…
— Michael Pettis (@michaelxpettis) January 18, 2021
16/16
meth, it means I am healthier than I thought. To say that China was the only major economy to grow in 2020, in other words, is only to say that we are unable to distinguish between GDP and the economy.
— Michael Pettis (@michaelxpettis) January 18, 2021
We all know the real story. Rebalancing takes reform that redistributes income from vested state-owned interests to households. That’s also a loss of power for the CCP both in terms of central planning control and the rise of richer freedom-loving folks.
So, instead, the CCP hits the brakes for a bit then stimulates again and the entire economy glides downwards towards permanent lower debt-burdened growth instead of the one-off hit and transition to a more vibrant market economy.
As a result, the CCP is preparing new forms of legitimacy for itself by firing up nationalism in opposition to foreign barabarians various.
