Is China back in the driver’s seat? In the dark days of 2009, it was China’s epic stimulus that kick-started global markets again. Under marching orders from Beijing, state-owned enterprises went on a commodity buying binge. Order was restored, at least for a little while.
Today we learn that Chinese GDP grew at an annualised pace of 6.7% in the first quarter. That’s extraordinary when compared to GDP growth in the Western world. But it was the slowest quarterly growth since… you guessed it… 2009.
And there was a worrying sign
Chinese banks loaned out about $211 billion in March, according to official figures. This is a repeat of the previous (and not sustainable) economic model. Borrow a lot of money. Spend it. Look busy. Get a high GDP figure. Be pleased.
But it’s not the quantity of growth that indicates economic health. It’s the quality of it. China’s fixation with fixed asset investment (bridges, roads, airports, trains) drove the commodities bull market. It’s not going to happen again. And it’s certainly not going to save the coal industry.
Category: Central Banks