The ‘unexpected’ China slowdown was entirely foreseeable

The headline in today’s New York Times reads “After Barreling Ahead in Recession, China Finally Slows.”  It cites a warning to this effect from the World Bank and quotes Diana Choyleva, a China economist at Lombard Street Research in Hong Kong:

“Clearly the [China] economy is much, much weaker than most people thought until recently,” Ms. Choyleva said. “They have a real mess on their hands.”

I am a big believer in data but what is amazing about this is that, in fact, the slowdown was evident more than a year ago for those who cared to see it.  On 18 April 2011, following a trip to Xiamen, Zhangzhou and elsewhere in Fujian province, I wrote a post titled “The great China infrastructure build-out is almost over” based on nothing more than what I could see looking out the car window — and what was missing, I wrote then, was the sort of monster-scale construction projects that had characterized all my previous trips to China for the last twenty years.  Fujian is a bellwether province if ever there was one: located on the coast across the straits from Taiwan, it is packed with foreign-owned factories and Xiamen (known as Amoy in colonial days) is one of the most impressively clean and prosperous cities I’ve seen in China.  And for China, which sees 8% growth in a bad year, this was what a slowdown looks like: a few residential towers going up on the outskirts of town rather than the indiscriminate, mile-by-mile, wholesale redevelopment of the historic areas in the city centers.

A few months later, I wrote again about the investment banks that were starting to see the first signs of a slowdown showing up in the data, with the French bank SocGen pointing to an imminent bursting of the real estate bubble — which, indeed, has come to pass.  The highlight of that SocGen report was the figures on what, exactly, China had built the year before:

They are astounding: last year, China built 1.8 billion square meters (almost 20 billion square feet) of new apartments and condos, which is equivalent to the entire extant building stock of Spain constructed since the times of the ancient Romans; in the process, China consumed 55% of the global cement supply last year.

And now, somehow, we have analysts professing surprise that the China slowdown has come so suddenly.


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