A quick preview of the China Q4 GDP data, which is due at 0200GMT on 20 January 2015

OK, what to look for in today’s release. First, check out these bullet points … but don’t go on running about like a headless chook just yet:

  • This will wrap up the year’s GDP growth, and its expected to show the economy slowing for a fifth consecutive year.
  • Its also expected to be China’s slowest annual expansion in 24 years

Still with me? OK … one thing to note is a 7.2% growth rate for the Chinese economy in 2014 is showing more growth than, for example, double digit growth was say, in the mid 2000s. As the economy in China gets bigger and bigger it ain’t gonna grow like an emerging economy does.

A look at the Chinese economy (in brief):

  • An important goal for Chinese policy makers is job growth, and on that front the reported data from 2014 shows that both job creation and wage growth remain relatively stable
  • Growth due to credit expansion is still a concern in China … there are still valid concerns about a slump in the real estate sector, and the potential for sharp contraction in construction and investment activity that a slump would bring about
  • Housing sales have been falling in 2014, but on the other hand investment in housing has still grown (raising questions on high levels of inventory and overcapacity in the sector)
  • In 2015 , a lot more infrastructure investment projects are expected … to help perhaps mitigate the risk of a construction contraction feeding through into the rest of the economy (or put it off for later, if that’s your view)

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Here is what is expected.

For the y/y GDP for Q4

  • expected is +7.2%
  • prior was +7.3%

(ps. That ‘expected’ figure is from a Bloomberg survey of 50 estimates. I’ve seen the ‘expected’ reported elsewhere at 7.3%. On the range of estimates, I’ve seen reputable forecasts from 6.9% to 7.6% … and the usual disreputable ones of ‘complete collapse, we’re all doomed’

:-D

. I reckon the 7.2% forecast is about right … but the risk, for me at least, is a 7.1 or maybe even a 7.0 reading)

If the data show anything less than 7.2% expect pressure on Chinese markets and on the Australian dollar. An outlier result below 7.0% could mean very sharp falls indeed. To repeat … below 7% would be an outlier result (headless chooks may disagree).

Note also that the Chinese stockmarkets had big falls on Monday (this was cited as the reason), so a better result from the GDP could well set up a decent retracement rally.

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ps. Other data from China today includes industrial production, retails sales, and more