January 18, 2025 • 11 mins
We unpack China's 2024 economic data, discuss why it's not as positive as the headline figures would suggest, & is TikTok about to be banned in the US
China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy. These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts.
My Patreon: https://www.patreon.com/chinaupdate
Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy. These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts.
My Patreon: https://www.patreon.com/chinaupdate
Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Happy Saturday, everybody. Welcome to another episode of China Update,
where it provides you with the most up to date political, economic,
and geostrategic analysis on the world's number two economy. My
name is Tony. Let's jump in now. We have a
big video today, a lot of material to move through,
and it's likely we will have another extra episode tomorrow
on Sunday. Yesterday, Beijing published its official data for December
(00:20):
and by extension, all of twenty twenty four. Today we
will be unpacking these numbers and examining the devils and
the details. Now. At this point, as we will see,
there is little trust in the official numbers, and we
will discuss how things are likely much worse than the
headline growth figures would suggest. But first it is important
that we note the official numbers. China's economy officially grew
(00:41):
five percent in twenty twenty four, fueled by a late
year policy blitz and an export boom. Gross domestic product
surged officially at least five point four percent year on
year in the fourth quarter, marking the fastest pace in
six quarters and aligning with General Secretary Shooting Ping's new
year forecast. Now, even if these numbers were accurate. Despite
the strong finish, deeper economic concerns remain. Consumption growth lagged
(01:05):
behind pre pandemic levels, with retail sales growing at three
point five percent. Last year. Property investments saw its steepest
contraction on record, and deflation persisted for a second consecutive year.
Adjusted for falling prices, nominal GDP grew only four point
two percent, the slowest rate since the Mail era in
the late nineteen seventies, excluding the pandemic period, and this
(01:28):
is assuming the numbers are accurate. Indeed, deflation is especially concerning.
Producer prices have been a negative territory for more than
two years, and consumer prices managed growth of just zero
point one percent in December. Many economists believe it is
likely lower than this as well. Some of the biggest
Wall Street banks, including GP, Morgan, Chase and Co. And
Citigroup Inc. Are predicting that deflation will linger through twenty
(01:50):
twenty five, marking a stretch unseen since the end of
Maltadong's Great Leap Forward campaign, which plunged China into recession
and caused a famine that killed tens of millions of people.
Bank loan growth slowed to an annual seven point six
percent of December from eleven percent a year earlier. Government
tax revenue in the air through November was three point
(02:11):
eight percent lower than the same period in twenty twenty three.
Export strength, which contributes significantly to twenty twenty four's growth,
faces headwinds too. President elect Donald Trump's threats of steep
tariff on Chinese goods up to sixty percent pose a
serious risk to trade, one of the few bright spots
in China's economic data. Analysts warned that global businesses rushed
to front loan shipments last year could leave China vulnerable
(02:33):
to a sharp export decline as tariffs and trade attentions rise.
We will return to trade in tomorrow's video. Beijing plans
to address these challenges with a mix of fiscal and
consumption focused strategies. Authorities aim to expand subsidies for equipment upgrades,
consumer goods, trade ins and medical insurance, potentially doubling funding
to six hundred billion forty point nine billion US dollars.
(02:55):
Local governments may also use special bonds to address housing
supply issues by acquiring sol properties and unused land, But
as we have seen over the last few months, a
lot of this is too little, too late, and progress
in easing the real estate slump has been slow, with
twenty twenty four seeing a ten point six percent plunge
in property investment, the sector's worst performance on record. This
(03:17):
slump has offset gains in manufacturing and investments, spending, undermining
broader economic recovery efforts as deflation and trenches and export
uncertainties loom. Experts caution against policy complacency. Quote. Now is
not the time for Beijing to rest on its laurels
end quote, said loud Ten, Chief China Economists at Nomoral Holdings.
With significant global and domestic challenges ahead, China's growth trajectory
(03:40):
in twenty twenty five remains uncertain now. These are the
official numbers, and of course economists both foreign and domestic,
have long raised concerns about the accuracy of China's GDP figures,
as were Prasad, professor of Trade policy and economics at
Cornell University and former head of the International Monetary Fund's
China Division Express yesterday. Quote. These growth figures stretch the
(04:03):
bounds of credibility and will do little to build confidence
or alter the picture of an economy that is on
the ropes and in quote, a better read for the
economy is provided by flailing stock markets, continued turmoil in
the property sector, a deepening currency and capital outflows. These
indicators are hardly consistent with an economy hitting the growth
(04:25):
target on the nose in quote. Indeed, some scholars believe
that the data could be off by as much as
two percentage points, a distortion that has only grown in
recent years. According to these experts, China's weak consumer price inflation,
which has remained under one percent for months, and prolonged
negative producer price growth are clear indicators. A week demand,
(04:45):
these economic signals suggested the economy as stagnating despite the
government's optimistic growth projections. The country's ongoing property sector crisis
has further exacerbated these issues, sidelining local government investment and
consumer spending, both critical drivers of growth and lists at
Rhodium Group estimate that China's actual growth in twenty twenty
four could be closer to two point four percent, much lower, indeed,
(05:07):
half that of the official target. They have argued that
China's economy is likely twenty percent smaller than it officially is.
They also highlight distortions in key economic areas including household
consumption and grows capital formation, which have been negatively impacted
by the downturn in real estate, and of course, as
we have explored in previous videos, with surging debt, this
(05:29):
is not healthy growth either. Even state owned enterprises are
not immune from economic downturns. Many companies at cutting salaries
and postponing large investments. An employee at one state owned
firm in full Ten Province, speaking to UK based The
Financial Times this week, reported a salary reduction of over
twenty percent compared to three years ago, despite a promotion
in twenty twenty four. As we covered earlier this week,
(05:50):
financial regulators in Beijing have seen pay cuts as high
as sixty percent. Now we have a few more updates
to cover, but just quickly, if you're getting some value
from today's episode of China Update, I huge favor to ask,
that is, just to hit the like button. And if
you've not done so already and you think you'd watch
another one of these episodes, subscribing as also a tremendous help.
Thank you so much everybody for the ongoing support. Let's
(06:12):
continue in any other sign of the country's long term
structural problems to China's population shrank by almost one point
four million in twenty twenty four, the third consecutive year
of decline, as a slight rise in berths from the
previous year to nine point five four million was outstripped
by ten point nine three million deaths. On this point,
we will end Part one with these observations by Peaking
(06:34):
University Professor of Finance Michael Pettis quote. It seems to
me that much of the discussion surrounding the population decline
may be a little overdone. The real medium and long
term challenge for China lies in the way it rebalances
the domestic distribution of income. If it can raise household
income fast enough and in turn nondisruptive ways, a declining
(06:55):
working population is still consistent with rising living standards, even
if that means, as it most likely does, a slowdown
in GDP growth rates. If it cannot, a declining working
population will be the least of its problems. For me,
the real demographic problem China faces is not the decline
in its working population, but rather the unevenness of that decline.
(07:16):
That's because the working population will continue to rise at
a healthy pace in the faster growing richer eastern parts
of China. The rest of China, however, with its low
income levels, weak growth, and unmanageable debt burdens, will absorb
more than one hundred percent of the decline in China's
working population. What is worse, it will be their best
(07:37):
educated and most entrepreneurial young people who will migrate. With
this area already comprising a disproportionate share of non productive
investment in property and infrastructure, a declining working population means
that the economic value of this investment will fall even faster,
worsening the debt burden. If this forces the poorer parts
to cut back on educational spending and social services, it
(07:58):
can further entrench the disparate. The question is how Beijing
will respond to these rising difficulties. It would have to
choose between diverting resources to richard China, which would be
better for the economy, or to poor China, which will
be better for social and political stability. I'm not sure
how Beijing will respond, but I tell my clients that
we should increasingly consider not just how the Chinese economy
(08:21):
will choose or be forced to adjust, but perhaps even
more importantly, how unevenly this adjustment, including the demographic adjustment,
will be distributed throughout the economy. Next up and yesterday's video,
we asked whether TikTok might be saved at the last minute.
Today is looking far less promising for the popular Chinese
(08:43):
owned social media giant. In a landmark decision on Friday,
the Supreme Court upheld a federal law that effectively bans
techtok in the United States unless it undergoes a last
minute divestiture from Chinese ownership. The unanimous ruling has plunged
the app, which boasts over one hundred seventy million US users,
into deep uncertainty, with the deadline for compliance looming just
(09:06):
two days away. The ban or sale law, passed in
April of last year with bipartisan support and signed by
President Biden, addresses national security concerns regarding TikTok's parent company,
by Dance, and its potential ties to the Chinese government.
The court decision asserts that the law does not violate
the free speech rights of TikTok users, citing the scale
of sensitive data collected by the app as justification for
(09:28):
targeted action. TikTok has announced plans to go dark on
January the nineteenth unless the Biden administration intervenes. The Biden administration,
in a curious move, has said it will not enforce
the rule, even though Biden himself signed it into law.
President elect Donald Trump, whosume's office the following day, has
vowed to save the platform, but its strategy remains unclear.
(09:50):
Reports suggest he may issue an executive order to delay
enforcement at the law temporarily. Legal experts, however, question whether
such an order could override a congressional mandate, especially since
nowadays gone through the Supreme Court. The ruling has sparked
mixed reactions. Free speech advocates, including the night First Amendment Institute,
have criticized the decision, arguing it expands government power to
(10:13):
restrict speech under the guise of national security. TikTok creators,
who have used the app as a platform for creativity
and discourse have urged the government to find a resolution
that preserves the app accessibility. There are also those who
have long warned about the Chinese control over the app,
their connection to the Chinese government, and why it really
is a deep national security concern for Americans. TikTok's future
(10:36):
remains curious as enforcement looms. The law, known as the
Protecting Americans from Foreign Adversary Controlled Applications Act, imposes steep
fines on app stores and hosting services that continue to
support TikTok after the deadline. By Dance has refused to
sell the app, with the Chinese government opposing divestiture, further
complicating negotiations. With no sale imminent, TikTok employees in the
(10:59):
US are preparing for them various scenarios, including a potential shutdown.
Many users have already begun migrating to alternative platforms, while
some speculate on high profile buyers who might step in.
Earlier this week, we discussed reports that Elon Musk might
be under consideration, but nothing more has really come from
the story, and indeed, even if a buyer is found,
(11:20):
even a temporary ban could lead to irreparable damage to
TikTok's user base and reputation. The coming days will be
pivotal for TikTok, as the app's fate hangs in the
balance against legal, political, and international negotiations. Okay, that is
today's episode of China Update. Thank you so much everybody
for watching. Have a good Saturday, have a RESTful weekend,
(11:42):
and I will see you all tomorrow
Happy Saturday, everybody. Welcome to another episode of China Update,
where it provides you with the most up to date political, economic,
and geostrategic analysis on the world's number two economy. My
name is Tony. Let's jump in now. We have a
big video today, a lot of material to move through,
and it's likely we will have another extra episode tomorrow
on Sunday. Yesterday, Beijing published its official data for December
(00:20):
and by extension, all of twenty twenty four. Today we
will be unpacking these numbers and examining the devils and
the details. Now. At this point, as we will see,
there is little trust in the official numbers, and we
will discuss how things are likely much worse than the
headline growth figures would suggest. But first it is important
that we note the official numbers. China's economy officially grew
(00:41):
five percent in twenty twenty four, fueled by a late
year policy blitz and an export boom. Gross domestic product
surged officially at least five point four percent year on
year in the fourth quarter, marking the fastest pace in
six quarters and aligning with General Secretary Shooting Ping's new
year forecast. Now, even if these numbers were accurate. Despite
the strong finish, deeper economic concerns remain. Consumption growth lagged
(01:05):
behind pre pandemic levels, with retail sales growing at three
point five percent. Last year. Property investments saw its steepest
contraction on record, and deflation persisted for a second consecutive year.
Adjusted for falling prices, nominal GDP grew only four point
two percent, the slowest rate since the Mail era in
the late nineteen seventies, excluding the pandemic period, and this
(01:28):
is assuming the numbers are accurate. Indeed, deflation is especially concerning.
Producer prices have been a negative territory for more than
two years, and consumer prices managed growth of just zero
point one percent in December. Many economists believe it is
likely lower than this as well. Some of the biggest
Wall Street banks, including GP, Morgan, Chase and Co. And
Citigroup Inc. Are predicting that deflation will linger through twenty
(01:50):
twenty five, marking a stretch unseen since the end of
Maltadong's Great Leap Forward campaign, which plunged China into recession
and caused a famine that killed tens of millions of people.
Bank loan growth slowed to an annual seven point six
percent of December from eleven percent a year earlier. Government
tax revenue in the air through November was three point
(02:11):
eight percent lower than the same period in twenty twenty three.
Export strength, which contributes significantly to twenty twenty four's growth,
faces headwinds too. President elect Donald Trump's threats of steep
tariff on Chinese goods up to sixty percent pose a
serious risk to trade, one of the few bright spots
in China's economic data. Analysts warned that global businesses rushed
to front loan shipments last year could leave China vulnerable
(02:33):
to a sharp export decline as tariffs and trade attentions rise.
We will return to trade in tomorrow's video. Beijing plans
to address these challenges with a mix of fiscal and
consumption focused strategies. Authorities aim to expand subsidies for equipment upgrades,
consumer goods, trade ins and medical insurance, potentially doubling funding
to six hundred billion forty point nine billion US dollars.
(02:55):
Local governments may also use special bonds to address housing
supply issues by acquiring sol properties and unused land, But
as we have seen over the last few months, a
lot of this is too little, too late, and progress
in easing the real estate slump has been slow, with
twenty twenty four seeing a ten point six percent plunge
in property investment, the sector's worst performance on record. This
(03:17):
slump has offset gains in manufacturing and investments, spending, undermining
broader economic recovery efforts as deflation and trenches and export
uncertainties loom. Experts caution against policy complacency. Quote. Now is
not the time for Beijing to rest on its laurels
end quote, said loud Ten, Chief China Economists at Nomoral Holdings.
With significant global and domestic challenges ahead, China's growth trajectory
(03:40):
in twenty twenty five remains uncertain now. These are the
official numbers, and of course economists both foreign and domestic,
have long raised concerns about the accuracy of China's GDP figures,
as were Prasad, professor of Trade policy and economics at
Cornell University and former head of the International Monetary Fund's
China Division Express yesterday. Quote. These growth figures stretch the
(04:03):
bounds of credibility and will do little to build confidence
or alter the picture of an economy that is on
the ropes and in quote, a better read for the
economy is provided by flailing stock markets, continued turmoil in
the property sector, a deepening currency and capital outflows. These
indicators are hardly consistent with an economy hitting the growth
(04:25):
target on the nose in quote. Indeed, some scholars believe
that the data could be off by as much as
two percentage points, a distortion that has only grown in
recent years. According to these experts, China's weak consumer price inflation,
which has remained under one percent for months, and prolonged
negative producer price growth are clear indicators. A week demand,
(04:45):
these economic signals suggested the economy as stagnating despite the
government's optimistic growth projections. The country's ongoing property sector crisis
has further exacerbated these issues, sidelining local government investment and
consumer spending, both critical drivers of growth and lists at
Rhodium Group estimate that China's actual growth in twenty twenty
four could be closer to two point four percent, much lower, indeed,
(05:07):
half that of the official target. They have argued that
China's economy is likely twenty percent smaller than it officially is.
They also highlight distortions in key economic areas including household
consumption and grows capital formation, which have been negatively impacted
by the downturn in real estate, and of course, as
we have explored in previous videos, with surging debt, this
(05:29):
is not healthy growth either. Even state owned enterprises are
not immune from economic downturns. Many companies at cutting salaries
and postponing large investments. An employee at one state owned
firm in full Ten Province, speaking to UK based The
Financial Times this week, reported a salary reduction of over
twenty percent compared to three years ago, despite a promotion
in twenty twenty four. As we covered earlier this week,
(05:50):
financial regulators in Beijing have seen pay cuts as high
as sixty percent. Now we have a few more updates
to cover, but just quickly, if you're getting some value
from today's episode of China Update, I huge favor to ask,
that is, just to hit the like button. And if
you've not done so already and you think you'd watch
another one of these episodes, subscribing as also a tremendous help.
Thank you so much everybody for the ongoing support. Let's
(06:12):
continue in any other sign of the country's long term
structural problems to China's population shrank by almost one point
four million in twenty twenty four, the third consecutive year
of decline, as a slight rise in berths from the
previous year to nine point five four million was outstripped
by ten point nine three million deaths. On this point,
we will end Part one with these observations by Peaking
(06:34):
University Professor of Finance Michael Pettis quote. It seems to
me that much of the discussion surrounding the population decline
may be a little overdone. The real medium and long
term challenge for China lies in the way it rebalances
the domestic distribution of income. If it can raise household
income fast enough and in turn nondisruptive ways, a declining
(06:55):
working population is still consistent with rising living standards, even
if that means, as it most likely does, a slowdown
in GDP growth rates. If it cannot, a declining working
population will be the least of its problems. For me,
the real demographic problem China faces is not the decline
in its working population, but rather the unevenness of that decline.
(07:16):
That's because the working population will continue to rise at
a healthy pace in the faster growing richer eastern parts
of China. The rest of China, however, with its low
income levels, weak growth, and unmanageable debt burdens, will absorb
more than one hundred percent of the decline in China's
working population. What is worse, it will be their best
(07:37):
educated and most entrepreneurial young people who will migrate. With
this area already comprising a disproportionate share of non productive
investment in property and infrastructure, a declining working population means
that the economic value of this investment will fall even faster,
worsening the debt burden. If this forces the poorer parts
to cut back on educational spending and social services, it
(07:58):
can further entrench the disparate. The question is how Beijing
will respond to these rising difficulties. It would have to
choose between diverting resources to richard China, which would be
better for the economy, or to poor China, which will
be better for social and political stability. I'm not sure
how Beijing will respond, but I tell my clients that
we should increasingly consider not just how the Chinese economy
(08:21):
will choose or be forced to adjust, but perhaps even
more importantly, how unevenly this adjustment, including the demographic adjustment,
will be distributed throughout the economy. Next up and yesterday's video,
we asked whether TikTok might be saved at the last minute.
Today is looking far less promising for the popular Chinese
(08:43):
owned social media giant. In a landmark decision on Friday,
the Supreme Court upheld a federal law that effectively bans
techtok in the United States unless it undergoes a last
minute divestiture from Chinese ownership. The unanimous ruling has plunged
the app, which boasts over one hundred seventy million US users,
into deep uncertainty, with the deadline for compliance looming just
(09:06):
two days away. The ban or sale law, passed in
April of last year with bipartisan support and signed by
President Biden, addresses national security concerns regarding TikTok's parent company,
by Dance, and its potential ties to the Chinese government.
The court decision asserts that the law does not violate
the free speech rights of TikTok users, citing the scale
of sensitive data collected by the app as justification for
(09:28):
targeted action. TikTok has announced plans to go dark on
January the nineteenth unless the Biden administration intervenes. The Biden administration,
in a curious move, has said it will not enforce
the rule, even though Biden himself signed it into law.
President elect Donald Trump, whosume's office the following day, has
vowed to save the platform, but its strategy remains unclear.
(09:50):
Reports suggest he may issue an executive order to delay
enforcement at the law temporarily. Legal experts, however, question whether
such an order could override a congressional mandate, especially since
nowadays gone through the Supreme Court. The ruling has sparked
mixed reactions. Free speech advocates, including the night First Amendment Institute,
have criticized the decision, arguing it expands government power to
(10:13):
restrict speech under the guise of national security. TikTok creators,
who have used the app as a platform for creativity
and discourse have urged the government to find a resolution
that preserves the app accessibility. There are also those who
have long warned about the Chinese control over the app,
their connection to the Chinese government, and why it really
is a deep national security concern for Americans. TikTok's future
(10:36):
remains curious as enforcement looms. The law, known as the
Protecting Americans from Foreign Adversary Controlled Applications Act, imposes steep
fines on app stores and hosting services that continue to
support TikTok after the deadline. By Dance has refused to
sell the app, with the Chinese government opposing divestiture, further
complicating negotiations. With no sale imminent, TikTok employees in the
(10:59):
US are preparing for them various scenarios, including a potential shutdown.
Many users have already begun migrating to alternative platforms, while
some speculate on high profile buyers who might step in.
Earlier this week, we discussed reports that Elon Musk might
be under consideration, but nothing more has really come from
the story, and indeed, even if a buyer is found,
(11:20):
even a temporary ban could lead to irreparable damage to
TikTok's user base and reputation. The coming days will be
pivotal for TikTok, as the app's fate hangs in the
balance against legal, political, and international negotiations. Okay, that is
today's episode of China Update. Thank you so much everybody
for watching. Have a good Saturday, have a RESTful weekend,
(11:42):
and I will see you all tomorrow
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