Bread and circuses

China data divide real and economic worlds

China's economic data, even when as miserable as the numbers released on September 13, makes little difference to ordinary people. That may explain an apparent lack of urgency from China's central planners to respond to what looks like a dramatic slowdown. Yet it is naïve to think that the real and economic worlds can stay separate.

Growth in industrial output slumped to 6.9 per cent last month - the lowest since the financial crisis of 2008. Electrical output and imports, which help show how busy China's factories are, were both lower in August than a year earlier. Yet Premier Li Keqiang, speaking at last week's World Economic Forum in Tianjin, lauded urban job creation that has almost hit its full-year target, and said there was little need for large amounts of credit to revitalise growth.

Li is on the right track in one way. For most Chinese people, life is getting better. Measures like GDP, which can be easily manipulated, matter less than decent jobs, rising wages and the ability to consume. All three look solid. Retail sales decelerated in August but only slightly, and only in nominal terms. Graduate wages, surveyed by Peking University, are increasing 15 per cent a year - though the $492 a Beijing university-leaver earns per month is still no more than what the typical taxi driver takes home.

Even so, the shockingly bad data could prefigure real problems. When companies produce less, they are less able to service their debts. China's corporate bank loans are 95 per cent of GDP, and investors are already pulling funds from alternative sources of finance, like the trust sector, whose assets under management fell for the first time in July. China's cities are plastered with advertisements offering short-term loans. Real estate is probably the main link between the real world and the one inhabited by economists. Property prices are falling in most big cities, despite the removal of buying restrictions in dozens of cities. Housing sales fell 13 percent year on year in August, and some kind of stimulus is starting to look inevitable. If Li is preoccupied with what keeps real Chinese citizens content, house prices are likely to be high on his watchlist.