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No matter which official indicator you look at, the Chinese economy is in decline. Retail sales growth is barely above 5 percent, the lowest level since , with automobile sales crashing 13 percent. Total imports in U. With China accounting for some 10 percent of world trade and almost 20 percent of world trade growth in the last decade , this import weakening is a significant threat to global growth. What about the unofficial data?

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As early as late December, it warned that:. Most telling, still-heavy borrowing did not lead to heavy capital expenditure, with paltry results in services and retail driving a sharp drop in overall investment growth.

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The CBB also reports that only 18 percent of companies operating in the trade-heavy southern province of Guangdong showed an increase in export orders in the fourth quarter, down from 65 percent in the third quarter of The main problem of the Chinese economy is debt and overcapacity. Debt has blown up to percent of GDP through the state-controlled banking system.

The financing went into building trains, roads, airports, apartments, shipyards—anything that can be built. And while some of the stuff is undoubtedly useful, a lot of it is not.

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This problem could have been nipped in the bud, but Chinese central planners wanted ever more steel mills and high-speed trains, and to push back the day of reckoning when most of the unprofitable companies would go bankrupt. Now, the debt growth has also come to a halt, which is most likely the root cause of the massive slowdown.

Official broad credit growth has slowed to around 10 percent, the lowest in a decade.

Within the broader debt system, the shadow banking system of trust loans, bankers acceptances, and wealth-management products is deep into negative growth territory. On the other hand, the CBB reports that companies are maxing out official channels to stay liquid, but this is more a sign of desperation rather than future growth to come:. This divergence makes sense as fixed-asset investment rose 5. According to CBB, it was state and larger firms that borrowed the most, channeling it into construction activity, which is the easiest lever for the central planners to manipulate. Floor space under construction rose 5 percent in December, according to official figures, while there are still about 20 months of inventory left to be sold, according to Capital Economics estimates.

After the new year, the PBOC easing became less clandestine as the central planners in the Chinese regime are getting desperate.

China's economy is in severe trouble: Gordon Chang

After lowering the amount of money banks have to hold on reserve in late , the PBOC started a full-blown Quantitative Easing QE scheme at the beginning of But Chinese leader Xi Jinping has found some strong words to warn his comrades at an internal party meeting in January:. World economy in deep trouble. Among rich nations, the US outlook remains the least troublesome.


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But given a recession in the eurozone and a recent contraction in Japan, that's not saying a lot. At the same time, many emerging markets are hurting. India is likely to log its weakest growth in a decade this year and Brazil's economy is also sputtering.

Luckily, growth in China appears to be firming. The coming week brings a slew of reports expected to show the US economy struggling. Data on Friday will likely show employment growth slowed to just jobs last month from in October, according to a Reuters poll of economists. US manufacturing data this week is also likely to suggest a fourth-quarter slowdown is at hand.

Indeed, some worry the fourth quarter, which has been affected by the impact of superstorm Sandy, will bring the world's largest economy remarkably close to stall speed. Following figures showing consumer spending fell in October for the first time in five months, Porcelli revised down his forecast for fourth-quarter US GDP growth to a 0. Europe is still a mess.

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Is India exaggerating its economic growth? - BBC News

Greece's latest debt deal quelled immediate concerns of a financial market meltdown, with terms of the country's bond buy-back plan likely to be announced early this week. But the country remains mired in a deep depression, with little prospect for recovery, and not everyone is convinced it will be able to remain a part of the single currency. The attention of financial markets has also quickly returned to Spain, where the economy continues to worsen despite an improvement in credit market conditions prompted by hopes of eventual help from the European Central Bank. Spanish retail sales plunged 9.

The trouble for Spanish Prime Minister Mariano Rajoy is that ECB help, in the form of purchases of Spanish bonds, will not come unless Spain formally applies for sovereign aid, a highly unpalatable choice politically.