Industrial production for the combined January/February period in China fell to just 5.4%, matching the lowest growth rate of the past fourteen years. Only the January/February 2002 IP rate was lower, but that was a single data point giving way to the rising financialization of the late eurodollar period. In 2016, these decelerations are commonplace, determined, and have no end in sight. At 5.4%, industrial production matches China’s worst level of the Great Recession, that of November 2008.
China’s industry has been consistently slowing down since early 2012, an unmistakable reference that is a global phenomenon. No matter how many times monthly variation ticks upward here and there (with each being celebrated by the mainstream and economists regardless of context) the overall trend remains intact. The slowdown just keeps churning lower and lower over time, to the point that IP has been 8% or below each of the past 19 months dating back to the summer of 2014. It is the accumulation of low growth that is the main concern as it only confirms that there will be no recovery, no return to the high-growth past.
That leads to inordinate problems because China is built on that past baseline. Overcapacity can be managed on a temporary basis (not well, but managed or offset) but put into the paradigm shift that we see currently and the whole mess needs to be reset – including and especially financial regimes that financed not just that overcapacity but that also required continued high growth to maintain price stability. From that view, the reluctance of the PBOC to do much more than try to manage the transition seems almost reasonable.
It isn’t at all unreasonable or unexpected to find industrial production in China at a historic low during the same months that Chinese exports collapsed. However as much this was all supposed to be about China managing Chinese imbalances, the close relationship between the continuous slowdown in exports (meaning “global demand”) and China’s industrial sector once again confirm that China is only the most visible representation of the structural deficiency in the whole global economy that is increasingly resembling cyclicality (a slowdown that won’t stop slowing down).
