As I’ve been saying for a while, China’s ugly economy is turning into a bullish talking point for Chinese traders, with today’s lackluster GDP numbers from the East Asian hegemon reinforcing that dynamic.
Chinese output grew by 4.6% year-on-year in the third quarter, according to official numbers released by the National Bureau of Statistics. That was a tad slower than the second quarter’s 4.7% annual rate of growth, but a touch faster than analysts had expected.
The details matter less than the key storyline, which continues to be the fact that China is struggling mightily against a deflationary tide created by a cataclysmic bust in its housing market.
A key arrow in the monetary quiver in this kind of scenario is a bond-buying binge from the central bank. Such programs, referred to broadly and somewhat inaccurately as “money printing,” were what the US Federal Reserve undertook in the wake of America’s own housing bust that began in the late 2000s. Showerings of this so-called “helicopter money” tend to lift the spirits of stock-market investors, as they’re partially intended to.
That’s why I’ve argued that the worse China’s economy gets, the more likely it is that Xi Jinping will be forced to fire up the People’s Bank of China’s fleet of helicopters sometime soon.
And in recent weeks, the Chinese stock market has soared as investors could almost hear the “chup-chup-chup” of the monetary choppers. But that air cavalry never arrived, prompting a tumble in Chinese share prices over the last week or so.
The message from Chinese policymakers in the wake of Friday’s lackluster GDP report — it was the slowest growth rate in over a year — was that help continues to be on the way. PBOC governor Pan Gongsheng told a conference Friday that the central bank could cut rates again on Monday, and revealed details of two new central-bank programs aimed at channeling cash into Chinese stocks.
The result was a pretty rosy day for Chinese shares, with the CSI 300 finishing up 3.6% and Hong Kong’s Hang Seng rising 3.2%.
Of course, if they want the markets to continue to rise, reinvigorating deeply dour Chinese consumer sentiment — just check out Procter & Gamble’s earnings report, also released Friday — eventually Chinese policymakers are going to have to come through with the flood of free, freshly created cash that the market is expecting/demanding.
That’s something they’ve seemed a bit reluctant to do.
