China Note: Skirting around the 6% GDP

Published on October 21, 2019

Senior sources in Beijing maintain that three provinces in China falsified their submissions of Fixed Asset Investment data that went into the official national government statistics last week to exaggerate their numbers to the upside.

These provincial leaders, allegedly, were reprimanded by Premier Li Keqiang, who then instructed the National Bureau of Statistics to recalculate the aggregate national data with updated and more accurate information.

That recalculation, from what we understand, adjusted the nine month YTD Year-on-Year FAI growth rate downwards, from 5.6% to 5.4%, which in turn, resulted in an adjustment of the Q3 GDP release downwards by 0.1%, from 6.1% to 6.0% — that is, skirting right at the cusp of the psychologically sensitive 6% lower band of the GDP target range initially set for this year by the State Council.

While it is not exactly clear what additional measures he may have in mind, Premier Li has since vowed to ensure the economic situation stabilizes and will show some modest recovery from Q4, and that Q4 GDP will not be lower than the 6.0% registered for Q3. That expectation is predicated in part on hopes that the effect of the tax cuts and monetary policy easing to date will be felt more acutely in Q4, in addition to some acceleration in local government special bond issuance and major project approvals leading to a rebound in infrastructure spending.

As to the trade negotiations, President Xi Jinping will deliver three reports at the upcoming Fourth Plenary Session of the 19th Central Committee, one of which will focus on the international environment.

In that report, Xi will update the current Sino-US relations, and set the guidelines and framework for a possible interim China-US trade agreement, as desired by both sides, for mid-November.

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