Chinese overnight repo rates were already on the rise (several trades at 5.5%: 200bps above Friday’s close) as contagion concerns over wealth management product default spreads and the Chinese Business Climate Index tumbled to its lowest since June 09. Equity futures were sliding also with JPY strength and the Shanghai Composite was testing down towards the 1-handle once again. Then, amid the glorious nashing of spreadsheets and in the face of missed manufacturing and services PMIs, Chinese GDP (according to the Chinese government) came in at a better-than-expected 7.7% YoY (7.6% exp.) and handily above the all-too-crucial-to-hit 7.5% target GDP growth – but in keeping with the Schrodinger plan missed QoQ expectations (+1.8% vs +2.0% exp.). Industrial production also miraculously met expectations of 9.7% perfectly; and (shocker) Retail Sales perfectly matched expectations of 13.6% YoY. The results of all this ‘meeting expectations’ – JPY weakness (back down to 104 instantaneously) and implicitly US equity futures regain some momentum and scramble back close to unchanged.
Chinese money markets are concerned…
China’s 4Q Business Climate Index dropped to 119.5 from 121.5 (lowest since June 09); and the Entrepreneur Index also fell to 117.1 from 119.5 (also the lowest since June 09)
But GDP beat expectations on a YoY basis…
But misses on a QoQ basis – QoQ annualized growth only 7.4% down from 9.1%
The response – JPY weakness and US equit yftures picks up
For a sense of just how well “managed” (or how well “trained” the analysts are) the Chinese economy is – by that we mean goal-seeked –
- US Q4 GDP “guess” at 3.3% has a +/-0.4% error… (about a 13% standard error)
- China’s Q4 GDP “guess” at 7.6% had a +/-0.1% error… (about a 1.3% standard error)
So does that mean China is 10-times better at Central Planning?
As Bloomberg’s Michael McDonough ( @M_McDonough ) pointed out, here are the countries most dependent on Chinese demand for their exports…