China: base effects blur the substance of the data jump

Fixed asset investment (35%), industrial production (35.1%), retail sales (35.8%). All these growth rates are in year-on-year, year-to-date format for February data.

Such high growth rates were mainly due to last year's lockdown due to the Covid-19 pandemic. We can say with confidence that the economy grew faster after the lockdowns were ended, and has recovered above pre-lockdown levels in most sectors. But we have to dig into the details to find out the substance of this growth.

We will start with the most interesting data, retail sales.

We can't really learn too much about the economic growth situation in China from fixed-asset investment and industrial production. But retail sales data did show something interesting.

The top three growth items were jewelry (98.7% YoY YTD), automobiles (77.6%) and catering (68.9%).

These three items tell us that Chinese consumers spent lavishly during the Chinese New Year holiday.

Catering is an item that was hurt very badly during Covid's social distancing measures. And although there are still social distancing measures for catering in place, the high growth rate means that it is recovering from Covid.

Investment in healthcare production grew 64% YoY YTD and in special equipment, it grew 60.2%.

The former is likely the result of investment to produce more vaccines for the 1.4 billion population as well as for exports. The latter is likely related to technology, which partly could be an expansion of semiconductor production lines.

For industrial production, the biggest areas of growth were in automobiles (70.9% YoY YTD) and micro-processors (111.9%).

Automobile production has been driven by both domestic and export sales following policies to transition from internal combustion engines to e-vehicles. It is obvious that chip shortages have driven the production of micro- processors.