Mountainous apartments to nowhere drive Chinese growth

Happy days are here again for Chinese growth! Q2 GDP is out and hit consensus at 6.2%:

There’s no mistaking that trend though is there?

Internals for June were all glowing with industrial production surging to 6.2% even as PMIs crashed and global supply chains ripped themselves out (LOL). The consumer just loved being shoved out of the global economy as well with retail launching to 9.8% (LOL). More to the point, the only measure that can be trusted, fixed asset investment (ie building empty apartments), rebounded to 5.8%:

Within the building economy, realty continues to pile up the empty apartments with new starts at 10.2% year to date:

Clearly running wildly ahead of all previous records:

Even so, floor area under construction could only hold at 8.8% year to date, not accelerate:

And the leading indicators are still falling with sales down -1.8% year to date:

Plus developer land purchases still down -27.5% year to date:

It’s not obvious who is building the empty apartments! SOE’s at the point of a gun, no doubt.

There is at least some supporting evidence for why construction remains strong in prices. New house prices were up 0.6% in June and 10.3% year on year:

Led by lower tier city price gains:

As top tiers slowed, pulling down the breadth of the boom:

Turning to output in June, crude steel fell back but remains mad at 87.5mt:

Weaker cement again shows again that it is empty apartments over infrastructure that is driving demand:

And energy output is a better gauge for overall output, managing to flop back into the positive, up a lousy 2.8% year on year:

And there you have it. No doubt the empty apartment boom and tax cuts are offering some support to beleaguered industry and the consumer but I simply do not believe output figures for those segments. This is old school China. Building apartments to nowhere to offset a crushingly embarrassing trade war and pretending it’s productive growth.

Go the Lucky Country.

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