Let’s Hear It for Bad Estimates – Alan Abelson, Barron’s
“China, it turns out, doesn’t report gross-domestic-product data as most everyone else does. It announces a growth rate, but neglects to supply a quarterly breakdown of real demand. Absent such vital information, it’s tough to get a grip on whether growth is healthily widespread or dependent on a handful of sectors…As Ben (we trust Mr. Simpfendorfer won’t mind the informality) notes, “in the case of China, there is risk the country is spending too much on building highways and factories, resulting in overcapacity and bad debts.”…China’s domestic demand furnishes less support to the global economy than commonly believed (not least by a lot of economists). No argument that imports have surged over the past decade, but the devil is in the details, which he forthrightly proceeds to provide. To wit:…Roughly a third of imports are ticketed for “re-export.” By way of example, Chinese factories buy semiconductors and motherboards from producers in Singapore and Taiwan, assemble them into notebook personal computers and ship the finished goods to the U.S. and Europe.”
Jeremy Jones, CFA
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