China's GDP Is Challenged. The Real Growth Rate Is Only 5%.

In a report released in May 20th, Citigroup believes that the growth rate of China's GDP may be only 5% after the change of the "Keqiang index", industrial output and nominal GDP.

In April, China's official GDP grew by 7% in the first quarter, a 6 year low.

Citigroup said in its April report that 7% of official data was far overvalued and the actual performance should be below 6%.

Citigroup's latest report continues to argue that China's economy is far worse than official data.

China's economy has fallen into a stalemate of the real effective exchange rate of RMB, the decline of credit growth and the diminished interest rate effect.

Citigroup's "Keqiang index" mentioned earlier was made by Premier Li Keqiang in 2007 when he was serving as secretary of the Liaoning provincial Party committee. Li Keqiang said at that time he preferred to analyze the economic situation through three indicators of electricity consumption, railway freight volume and loan volume.

A number of financial institutions refer to the "Keqiang index" and think that China's first quarter GDP has "moisture".

Ren Zeping, a macroeconomic analyst at Guotai Junan, once said in the research report that since the two quarter of 2014, the power generation, crude steel output and railway freight volume have deviated from industrial production and GDP. The degree of divergence has been close to the level at the beginning of 2008 at the beginning of -2009. "The divergence between our combined industrial production index and the official growth rate of industrial added value has again appeared and expanded, which has occurred since the 2 quarter of 2014.

It is much lower than the official figures. "

Since the two quarter, China's economy has not improved and its economic indicators continue downward.

In April, CPI and PPI data were not as good as expected, and CPI has been in the eight months in a row.

PPI declined for the thirty-sixth month in a row.

Meanwhile, the growth of industrial added value, fixed assets investment and retail sales in April were not as good as expected. The export volume in April this year dropped by 6.4% compared with the same period last week, while imports declined by 16.2%, which declined for two consecutive figures in fourth months.

Citigroup also believes that

At this level, credit will be relaxed and the central bank will expand its balance sheet.

In fact, China has escorted steady growth, and monetary policy and fiscal policy have come together.

In less than six months, China's central bank has cut interest rates three times and two times.

At the same time, the NDRC is deregulation of corporate bond issuance, and it is not subject to the quantitative index of debt issuing enterprises for the financing of high quality enterprises issuing bonds for seven major investment projects and so on.

Citigroup also expects exchange rate policy will not be adjusted in the short term, but the floating range of RMB exchange rate is likely to expand next year.