Submitted by Taps Coogan on the 18th of April 2019 to The Sounding Line.

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Leland Miller, CEO of China Beige Book International, recently spoke with CNBC about the outlook for the Chinese economy given the ‘credit soaked’ rally its has enjoyed since the start of the year and the reliability of Chinese economic data.

Leland Miller:

“You’ve got to take the actual GDP number with a grain of salt because this is not something that is as stable as the government presents it. But it’s very interesting this quarter because the consensus is that growth slowed between Q4 and Q1… We had our March data out at the end of March and so we’ve seen what happened in the first quarter and the month of March and in no way shape or form was Q1 growth slower than Q4. Every major sector improved from Q4 to Q1. Every region improved in Q1. I think every headline metric improved from Q4 to Q1. So the idea that growth slowed from Q4 to Q1, that’s just not in the data.”

“The GDP is of course… a politically massaged number… When there is a sharp drop, the Chinese don’t like to see it drop sharply, but then that means they can’t report a strong upturn either because they didn’t report the drop in the first place. So you get the swings taken out of the data. You get this nice smooth line. Right now the trend is up and even looking into the second quarter, data is looking up. The credit data won’t fall off a cliff so it’ll probable look up. So we are seeing better days ahead as well.”

“…Every rally in China is credit soaked. This one is particularly so. But, the issue with this (rally) that is different than others: typically you see interest rates go down across the board and we saw interest rates go up, in the banking market, in shadow banks, and bond yields all go up. This can happen at the beginning of a rally if people are getting excited; if they’re getting ready for a trade deal. But, this is not something that can happen for two or three quarters. So this could continue but it would have to be based on a policy decision by Beijing to further subsidize interest rate costs, probably dramatically. As a result, this is the big policy decision that the Chinese are going to have to make in the late spring early summer.”

As we discussed here, Chinese money supply has expanded over three times faster the US money supply since 2009 and over two times faster than its economy.

There is more to the interview so enjoy it above.

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