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Will "bad news" be "good news" for China's markets? Or does this confirm what 'censored' economist Zhang Songzhou warned - that China's real (as in not made-up) economic growth is dramatically lower than the official data?
To the consternation of Chinese censors, a presentation delivered by an economics professor at Renmin University in Beijing sparked a controversy last month when the professor claimed that a secret government research group had estimated China’s growth in gross domestic product could be as low as 1.67% in 2018, far below the official rate.
Well given tonight's almost unprecedented drop (and miss) in China's inflation prints, maybe not.
China - Factory - Inflation - December - Slowdown
China’s factory inflation slowed sharply in December, continuing the slowdown for a sixth straight month to the weakest level since late 2016 on softening demand and lower commodity prices.
China Producer Princes rose just 0.9% YoY - plunging from +2.7% YoY in November (and almost half the expected +1.6% YoY). This is the biggest MoM drop in PPI YoY since 2010...
Bloomberg - Reports - Pace - Fears - Return
As Bloomberg reports, the sharply decelerating pace brings back fears of a return of the deflation which ravaged corporate profits in 2012-2016. A return of slow or falling factory prices in China would squeeze corporate profitability and put pressure on global inflation, as export prices usually follow those at factory gate.
"Deflationary pressures are on the rise in China, driven by weakening domestic and export demand," China International Capital Corp. economists Eva Yi and Liang Hong wrote in a note ahead of the data.
Inflation - Period - Demand - Growth - Turn
"Inflation tends to fall following an extended period of softening demand growth, which was in turn led by slower expansion of the broadly-defined credit cycle."
Of course, in the new normal, this may be seen as 'good' news as it opens the door for PBOC to unleash some more serious monetary malarkey - because as we showed recently,...
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