CHINA: IS SKEPTICISM JUSTIFIED?

CHINA'S GREAT WALL OF WORRY

Tom Buttenberger

Seeking Alpha, July 19, 2012

Last Friday, China released their Q2 GDP print and sparked a rally in world markets. Economist Marc Faber appearing here on CNBC, casts doubts over the headline 7.6% YOY growth figure, and even goes as far as to say that the rally was due to how weak the report was, and the expectation of further monetary stimulus. He goes on to mention that his view of GDP in China is much lower based on trade data of Asian partners who are very reliant on exports to China. Are his views corroborated with the data? What else could he be looking at that would lend itself to this skeptical view?

To explore these questions I examined data from the World Trade Organization (WTO). It sounds like his central thesis is that the exports figures from some of China's major trade partners have been weak. As he alludes to, China is a major export destination for many Asian countries and using their export figures should provide a reliable proxy for overall personal consumption in China. Because if less international goods are being consumed, it is probable that less domestic goods are consumed as well - the main assumption being that the product mix has not changed. Shown below are YOY change rates for several countries' merchandise exports.

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