Monday’s calendar is relatively empty due to MLK holiday in the US so let’s take another look at the Chinese data from the morning. So what did we have there?
First of all, Q4 GDP up to impressive 6.5% y/y from 4.9% in Q3. Not too shabby as for the economy recovering from pandemic against a backdrop of the World struggling with the second wave. A look at retail sales disappointment (2.6% y/y in December) and industrial output beat (7.3%) is what we want to highlight.
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Create account Try a demo Download mobile app Download mobile appLong are days (and months) where China talked a lot about “demand” economy, helping re-balance the global macroeconomics. We are back at the exports-driven smart-savings “grow at the expense of the others” theme. In full scale.
Higher output, softer demand – with external stimulus Beijing does not need to add fuel to growth internally. Source: Macrobond, XTB Research
China was the first to get hit by the pandemic but with a combination of brutal restrictions and discipline was able to re-ignite the industry very quickly. Yes, the global economy is weak but with a good part of it still closed, stimulus money often finds way to China. As a result, Beijing does not need to flirt with adding even more debt and can easily contain health risks while the external demand (fueled by even more debt in advanced economies) helps it grow and rebalance itself at the same time.
End of rebalancing - China is clearly happy with 2 monthly record trade surpluses. Source: Macrobond, XTB Research
Sounds good? Yes, for China, not for the others. Weak Chinese demand is a drag for the other economies and will not help unless it changes going forward and if the monetary tendencies are any proxy – it will not. “Trade Wars are easy to win” – yes, from the strategic point of view China won it – big time.
