lunes, 25 de febrero de 2013

lunes, febrero 25, 2013


HEARD ON THE STREET

Updated February 24, 2013, 2:37 p.m. ET

Hidden Risks of a Hard Landing in China

By TOM ORLIK



The rebound in China's economy has helped underpin a rally in global markets. The truth, though, may be less rosy than official data suggest.


Government figures indicate a moderate economic slowdown over the past two years. Gross domestic product grew 7.8% in 2012, down from 10.4% in 2010, and above the official target of 7.5% for the year.


But those numbers may underestimate inflation, resulting in an overestimate of real growth, says Stephen Green, China economist at Standard Chartered. Using an alternative measure of inflation that better reflects rising rents and prices for services like health care and education, Mr. Green calculates GDP growth at just 5.5% in 2012.


There is more to be concerned about. On trade, official data show a strong rebound coming into 2013, with exports in December up 14% year on year. But comparing China's export numbers to import data from Hong Kong—the first destination for many of China's goods—suggests that is too high. Louis Kuijs, China economist at RBS, calculates the real export growth rate could be four percentage points lower.


On consumption, the official retail-sales index in December is up 15.2% year on year. Other data paint a different picture. ielsen's index of sales of fast-moving consumer goods, which should include fewer of the government purchases that distort the official data, was up just 9% in December, for instance.


Dismal recent results for some major retailers also suggest all is not well at the cash register. The latest results from sports retailer Nike, fast-food peddler Yum Brands and home-electronics giant Gome are all weak.


On investment, the government figures show fixed asset investment increased 21% year on year in the year to December. But that looks odd against a 14% year-on-year fall in sales of excavators in December and a 19% drop in steel pricesmeasures that should track investment growth.


Second-guessing China's growth rate is fraught with difficulties. The quality of the official data is sharply improved from even a few years ago, and alternative measures are often unrepresentative.


It is important, too, that labor markets appear tight and employers say staffing costs are rising. Yum Brands reported 10% year-on-year wage inflation in the fourth quarter, for example. That suggests China can live with slower economic growth without suffering crippling unemployment and social instability.


In the rest of the world, though,slower growth in China would be tough to swallow. The global marketrally is about growing confidence in the U.S. and hopes that the worst for Europe is over, as well as China's recovery.
But a 5.5% growth rate would put the world's second-largest economy in hard-landing territory—and that should be enough to shake anyone's confidence.

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