SinoInsight 1
On April 19, Xi Jinping chaired a Politburo meeting to discuss China’s economic situation, poverty alleviation work, and propaganda work.
A statement released after the meeting noted that while China’s economy in the first quarter of the year grew at a rate that was better than expected, “the economy is faced with many issues and difficulties, as tensions in the external environment tend to rise while downward pressure on the domestic economy remains.” The issues are “partly due to cyclical factors, but to a larger degree they have deeper structural and institutional roots, and must be tackled with unwavering efforts and sustained patience.”
According to official data, China’s GDP grew by 6.4 percent in Q1 2019. Nominal growth rate was 7.37 percent, or identical to Q4 2018.
OUR TAKE
1. China’s first quarter GDP growth figure has led many observers to claim that the Chinese economy has “rebounded” or “stabilized.” Yet if the economy has indeed “bottomed out,” then the Politburo would have issued a clear “all’s well, good times are ahead” message after its meeting per standard CCP modus operandi. The fact that Politburo continued to warn about “issues and difficulties” dampens the glow of China’s healthy-looking first-quarter GDP figure and challenges the “economic rebound” narrative.
We believe that the Politburo statement indicates that China’s economy has not truly “recovered” and instead hints at trouble ahead for the CCP regime.
2. China’s GDP figures have always been suspect. While China’s GDP officially grew at 6.6 percent in 2018, several Chinese officials have admitted publicly (implicitly or explicitly) that the economy was not in good shape.
In March, Renmin University economics professor Xiang Songzuo said in an interview with Hong Kong media: “China claims to be the world’s second largest economy, but no huge economy in the world has maintained a growth rate of over 6 percent. If the 6.6 percent [2018 GDP growth] is accurate, then there is no need to adjust economic policy, and it is okay to continue with the existing policy. However, the sweeping policy changes indicate that downward pressure on the economy is very great.” Last year, Xiang estimated that China’s GDP growth for 2018 was 1.67 percent or less.
Beijing has rolled out a range of stimulus measures this year, including boosting liquidity, ramping out infrastructure projects, and cutting taxes and fees.
3. A closer look at the official data suggests that some distortion had taken place:
China’s industrial output grew by 6.5 percent from a year ago in the first quarter of 2019. According to China’s National Bureau of Statistics data, much of the growth came in March, which saw a better-than-expected increase of 8.5 percent. Growth in industrial output, however, was not mirrored in industrial power consumption. In Q1 2019, power consumption for industries grew by 2.8 percent while that of secondary industries grew by 3 percent. In March, power consumption for industries increased by 6.1 percent while that of secondary industries increased by 6.3 percent. The large discrepancy between data points that should be correlated suggests that something is off with the official data.
According to NBS data, national fixed asset investment (excluding rural investment) grew 6.3 percent (10.1871 trillion yuan) from a year ago in Q1 2019. However, when we compared the NBS’s own data for Q1 2018 with that of Q1 2019, the year-on-year increase in national fixed asset investment was only 1.09 percent (10.0763 trillion yuan), or a difference of over 5 percent.
According to official data, secondary industry investment growth was 4.2 percent (332.24 billion yuan) in Q1 2019. Yet comparing the recently released data from a year ago reveals a growth decrease of 7.2 percent (358.13 billion yuan).
4. The growth rate of urban resident income and consumption is not as fast as real GDP growth, and consumption is weak.
In Q1 2019, per capita consumption expenditure of urban residents grew by 6.1 percent (7,160 yuan per person) while the per capita disposable income of urban residents increased by 5.9 percent (11,163 yuan per person). Both increases in income and consumption trail the official first-quarter GDP growth rate of 6.4 percent.
SinoInsight 2
On April 19, a student from the Communication University of China (CUC) shared a picture of former state television presenter Cui Yongyuan lecturing at the college. From the picture, the topic of his lecture was “Doing Oral History from Scratch”; this is consistent with Cui’s previous disclosures about his teaching stint at the CUC.
On April 15, Chinese internet star “Fan Wei” shared recent photos of Cui Yongyuan and his conversations with his friends on Weibo. Cui was quoted as saying, “In this world, some people love to be expressive because they don’t know the facts; others know too much and have no time to be expressive.”
OUR TAKE
1. We previously analyzed Cui Yongyuan’s involvement in the factional struggle between the Xi camp and the Jiang faction (see here and here).
Some observers believed that Cui would likely get into trouble for his role in the “Shaanxi 100 Billion Mining Case,” which concerns corruption at the highest levels of the People’s Supreme Court headed by chief justice Zhou Qiang. The social media posts about Cui, however, indicate that he is relatively free and does not have his movements restricted. His comment about being “expressive” suggests that he has more insider information on hand but is presently unable to disclose it.
2. In our April 11 of this newsletter, we noted that the CCP was clamping down on public discourse by blocking prominent verified Weibo users (“Big Vs”). Somehow, Cui Yongyuan managed to escape censorship despite his tussle with Zhou Qiang. This indicates that Cui has power political backers, and the Jiang faction-friendly political and legal affairs apparatus dares not move against him (at least in the interim). Per our previous analysis, we noted that the Xi camp could be behind Cui and his “explosive allegations.”
3. We believe that Xi Jinping’s political enemies are awaiting the outcome of Sino-U.S. trade negotiations before making a move. Once the outcome is finalized, the CCP factional struggle will likely intensify again.
