China pundits are reversing their opinions again as deep pessimism about the Chinese economy gives way to a more favourable assessment and an upscaling of growth forecasts.This is puzzling from a fundamental, data-based vantage point as nothing really has changed – except a belated realisation for some that Chinese data has actually held up reasonably well:
Even if the latter numbers rely on notoriously difficult to verify Chinese fixed asset investment data, they are consistent with booming commodity import volumes: coal up by close to 80 per cent; oil up more than 30 per cent; liquefied petroleum gas by 28 per cent;For Australia, the value of exports to China in “value terms recovered” is up 14 per cent, while exports overall excluding China are down 18 per cent year-on-year.
Local governments and their affiliated entities have been critical in boosting investment as foreign and private investors in general have adopted a more sceptical attitude towards China. At the same time, the key source of local government revenue is evaporating due to the property bust. The situation is similar to the 2012 euro area periphery crisis, when the European Central Bank’s “whatever it takes” backstop prevented a worse fiscal cliff for periphery sovereigns but did not finance outright growth acceleration.