China's economy appears to be weakening more rapidly than official statistics would suggest, raising fears of a painful slowdown that could be felt around the globe. Second-quarter gross domestic product statistics to be released this week are expected to show growth of around 7.5% compared with the same period last year, according to analysts' estimates. That would be the slowest pace since the depths of the global financial crisis. But government data are widely believed to understate the extent of China's woes.
Other indicators point to a much sharper decline, economists said. Record amounts of coal and iron ore are piling up at depots, signaling waning demand for electricity and building materials. Excavators and other heavy equipment are being idled or sold at deep discounts as housing construction has stalled. The demand for diesel, needed to power those machines, has been flat for six months. Shipyards have laid off thousands of workers and half-built vessels have been left to rust.
Industrial data point to a decline that government growth figures wouldn't fully reflect, according to economists who are downgrading their forecasts. Local officials throughout China are suspected of padding growth estimates to meet targets set by Beijing to boost their chances for promotion.
"Recent economic data, including steel production and corporate profits, have continued to weaken visibly," said Yiping Huang, an economist for Barclays. "There is a renewed perception that the real economy is much weaker than is suggested by official statistics."
Those, lke the Economist magazine, who see China as not dependent on exports and growing at over 7.5% for the forseeable future are finding it increasingly difficult to maintain their mental models. I have been pointing out that Chinese economic numbers are bullshit since 2007.