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Well China says its economic growth accelerated for the first time in two years with a nearly 8% GDP in the fourth quarter sounds great doesn't it but my next guest says those numbers don't always -- The whole story Leland to -- is managing director at -- -- -- to internationally doesn't call police survey on China modeled.
Off to the -- Beige Book and -- thank you so much for being here.
Because it brings up the key question how could we trust any of the economic data that comes out of China have you sold through all of that well I think their data points -- there you follow but.
Our solution is to do -- ourselves to the China Beige Book is all independent data.
The break the economy up into sectors and into regions and we track the data every quarter ourselves.
To verify but how do you gather -- -- mean.
Some of it comedies any minute audited financial statements you can't believe the numbers coming out of individual companies exactly we don't use middleman would the only way we do is we -- ourselves we interview over 2000 firms.
Every -- go to China we -- a lot of operations throughout all of China we have a quantitative -- -- we interview over 2000 firms every quarter.
We have a banker -- race that we interview bankers separately.
And the we have -- -- surveys that we do in depth interviews.
With people with firms in every region in every sector so -- or that gathering what are you finding out about the Chinese economy right now we get the sense it's growing again where is the real strength in the economy.
Well the new leadership wanna growth so voila we've got growing up.
But I think he looked beneath the surface and in order to figure out the real story so you've got strength in retail and you've got stability in.
Some stabilization in manufacturing and mining in real estate.
But you shouldn't ignore the head winds which are quite significant right now and what you're seeing is.
Significant inventories built up across manufacturing mining and across the country.
And you've also got a problem loan demand and corporate firms are not borrowing right now.
Do you worry about currency manipulation and should we be doing anything about that here in the United States.
It's outside what -- China Beige Book talks about but my perfect.
My idea this is that we we should stay out of the currency manipulation game and work on market access issues -- right.
-- China such has always officially been such an export driven economy although they trying to address that increase.
Has that happened.
Yeah I mean we've looked at retail retail is is a pretty good but proxy.
For consumer demand but it's not a perfect one.
So we've seen is it's increasing retail sector growth and that's great but in order for the economy to rebalance its not just consumption growing.
It's the share of consumption vs investment growing which means -- Chinese Government needs to stop.
Dumping enormous amounts of investment dollars into infrastructure throughout the country in less -- that.
-- they can have as much consumption is they want and it won't change the share of consumption vs investment because -- -- motorists here come right they're cutting interest rates and dampen short term cash into the system so they could.
-- end up like us.
Well or war or for worse or I -- he you know the idea here is you have to have demand you can play around with the economics of this you can.
Make cheap money can do other things but if you don't.
Ultimately have demand that you won't have an economy that works and this is what China's big problem is right now he see a lot of growth numbers looking pretty good people are back on the bull train.
The China is looking good what you're seeing these yellow lights like cock rising inventories which means -- credit product productive right.
And he's seen loan demand falling and so these are these are signals that something bad might be going on under the surface it's amazing -- over the China has a labor force of 937.
Which to me it's just how -- to get my head around that.
But other enough decent paying jobs for that for that labor force to be employed wolf this is why rebalancing is so important.
If you have an economy that is it focused on manufacturing keeping all of these low margin -- industries in business that you're not.
But if you push towards a re balanced economy sector was speaking from and you have more jobs and services more jobs in retail more jobs more higher paying jobs throughout the economy.
That you're gonna have more opportunities for people to make more money right -- elect improved so that's the challenge to the Chinese economy right now.
They need to demand come along with -- in Israel apparently was no let up the China based but thank you so much for being -- -- at a faster than.
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