China’s GDP Growth Muted-If You Believe The Numbers

The news out of China is that GDP growth fell to 6.1% in March, the weakest growth rate on record. Of course, the records only go back to 1992.

Here is how the NYT reports the spin from China:

China’s economy slowed in the first quarter to its weakest pace on record, but an improvement in data for March offers tentative signs that the worst may be over for the world’s third-largest economy.

Annual gross domestic product growth fell to 6.1 percent, down from 6.8 percent in the fourth quarter of 2008 and slightly below economists’ forecasts of a 6.3 percent rise.

That marks the weakest growth since quarterly records began in 1992.

Growth was dragged down largely by a sharp fall in exports in the first three months, but was offset somewhat by the implementation of the government’s 4 trillion yuan ($585 billion) stimulus package, which helped prompt a surge in lending in the first quarter.

Annual growth in urban fixed-asset investment surged unexpectedly to 28.6 percent in the first three months, while industrial output growth rebounded to 8.3 percent in March, from a record low 3.8 percent in the first two months of the year.

I think it would be helpful to have a little more information on that 28.6% increase in fixed-asset development. Given that most reports suggest that the country has a monster real estate bubble and it probably has too much capacity already, I’m not sure exactly how that big an increase in fixed-assets is going to add to long-term productivity.

Bottom line, any numbers from China are questionable at best. The Soviet Union used to report impressive economic growth and the world marveled. Eventually, the veil slipped and the truth was evident. It’s important for a lot of reasons to remember that there isn’t much difference between the Chinese and the old Russia.

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