Derek Scissors on China Eco Data (Audio)

Chinese president and chuging things security a third term. First of all, the data itself sort of perhaps belied that speculation that it was delayed simply because it was bad, because GDP was better than expected, and we had other bits and bombs of data which were better than expected. Apart from, of course, retail sales. That gives a sense what the picture it drew for you. I do think the second quarter the third quarter was better than the

second quarter. I don't think that's unreasonable. Second quarter was terrible due to the Shanghai lockdown that was mentioned earlier, among other things. I do think also that the data has been massage to make it look a little better than it actually is. I think the three third quarter GDP growth is probably off by half percent or more. Maybe it's more in the low three. He's on the

high threes. That is an effect on on annual TDP growth. Um. I think even you know the retail sales are the weakness. They were reported as gaining three point five percent in the third quarter, but import growth to the third quarter was below which is pretty hard to reconcile with with stronger consumption from the second quarter. UM, So I think the data. I think it's legitimate for China to say, hey,

the economy got better in the third quarter. I think it did, but I also think that it was puffed up a little bit for the Party Congress and still plenty of issues from Maine. So we've had this route in Chinese assets, and you do have some like Marko Kolanovich and and others as well saying that this could be an opportunity that doesn't support the fundamentals. But but I think we do need to say that it could

be different this time. I mean, we may not get a bounce because President she he's not going anywhere, and he hasn't shown um the likelihood to change very much. And so the campaign to reign in the private sector maybe with us for a long time. Yeah, I think that's the right take. I mean, we've seen Wall Street, including JP Morgan say again and again and again, Okay, you know, now China is going to turn around and

it doesn't. I suppose if you make the prediction ten times, you're gonna be right once and then say, look, I was right. But the key point is what you raised, which is fundamentals include policy. They include the development model that you're that you're trying to implement, and China is not trying to implement a development model that a lot of people want them to implement. Uh. They want to turn back to growth and to think that more prosperity

for private business is really important. And that's just it hasn't been the case. It hasn't been the case before COVID shooting, paying attack the private sector in China. Before COVID started, he wasn't exactly pro private sector before that. So I think saying the fundamentals in China are good misses a policy environment where China is not trying to do with a lot of foreign observers wanted to do. It's instead trying to make itself more independent, which is

a very different thing than growing quickly. This is it, isn't it. I mean, it's meant to be about qualitative and not quantitative growth right now. But you know that's one way of looking at it. I suppose I mean, you know, if you depends on what you mean by qualitative. I do think there's less pollution in China, so that that's a positive. They do want to have better jobs, not not make shift construction jobs the way that they were creating when when the labor force was expanding really rapidly.

But another element of quality for Shijing Ping, I think it's pretty clear is if we're less dependent on the rest of the world and the world rest of the world is more dependent on us, that's good growth. I'd rather have three percent growth like that than six or seven percent growth where I fear my political opponents overseas, for example in the United States, have more leverage, So that's another element of quality for him. Quality growth is

a political term as well as an economic and environmental term. Well, let's talk about quality of policymaking, because you know, that's one of the reasons why we've seen the sell off in Chinese assets is that it's it's not just that all the power rests with shijin Ping, it's that some people will be appointed into position ends out of loyalty rather than out of the quality of management. I think

that's that's reasonable. I don't know how important it is. Um, did the people who were in these positions before have any discretion? I don't. I almost hesitate to name people's names. But the current I think did. Right. Lee Ka Chong sort of stood up to President she in some ways uh and actually changed the policy making a structure at the State Council. Uh. He didn't. He wasn't able to modify zero COVID. Um. He didn't stop the attack on

the private sector in two thousand nineteen. Um. You know, there are a lot of examples. You may be right, don't get me wrong. I I'm not saying that, Oh, we know what really goes on behind the scenes, and maybe Lee Ka Chong had more influence than we think. But if he did have more influence than we think, imagine how bad in terms of of you know, growth model China would be following. Because things have not been good in terms of Chinese economic policy maximizing prosperity. It's

accomplished other goals, but not maximizing prosperity. If Lee has been able to modify that, yes, then we're heading for big trouble. But I don't think it's because of quality. I think it's because who has influence over she I think that's the question more than well. And I think that the general gist of the question was that policymaking may not get better from here. Oh I don't just thank that. No, there's no reason to think that it would.

I don't know why anyone would have thought that a week ago exactly as the point it could get, it could get worse, depending upon I suppose you know what you think. Um, you know the the dividing line is, Derek, we're out of time. Unfortunately. Derek Scissors, chief economist at China Bag Book