China: Q3 GDP was in-line with expectations - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, notes that the Q3 Chinese GDP was in-line with expectations at 6.7%, matching Q1 and Q2.

Key Quotes

“To say that number does not tell the full story of an economy that is seeing real problems in some sectors, and an increasingly-epic bubble in another, is an understatement. Nonetheless, alongside yet another huge increase in borrowing seen this week, these data send a clear message that the authorities will do “Whatever it takes with Chinese characteristics,” which should limit volatility near-term, at least. (Indeed, cynics might want to write their Q4 2016 GDP review now.) Yet the longer-run view is consequently more troubling.

Looking at China’s recent increase in debt-to-GDP against other debt crises shows we have arguably already hit the peak of the late-80’s Japanese bubble; and if we continue on the present trend for another two year - for example, if people borrow money to make down-payments on mortgages, or we get a rapid expansion of mortgage-backed CLOs - then China will reach the excesses of the US in 2008. That would mean lots more “Whatever” in the “Whatever it takes with.”