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

2/16

were projecting negative or barely positive GDP growth for China in 2020 (the OECD, for example, expected China’s GDP to contract by 3.7%), I insisted that GDP growth for 2020 would be positive, and probably between 2% and 3%.

Today, it was reported as 2.3%. How did...

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...

4/16

worsening of the healthy parts of its economy by unleashing enough of the unhealthy, non-productive growth it has long tried to constrain – basically real estate and infrastructure investment – in order to achieve as much economic activity as it...

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.