Why BNP Paribas Disagrees With China-Invest?

China-Invest asserts:

china-invest said... China has a very cheap manufacture cost, that's why regardless of the crisis, its economy is still growing.

Well, no doubt, China has a very effective decision making!

It just happens that I have the latest "Global Outlook" by BNP Paribas in front of me. Why the economists at BNP Paribas are pointing out:

China’s unparalleled ability to support the economy with expansionary fiscal and monetary policy is the key factor behind the progressive economic recovery now in train. Given the momentum the economy now has, we forecast GDP growth of 8.2% in 2009 and 9.5% in 2010.

Fiscal stimulus has centred on the government’s investment and infrastructure orientated RMB 4trn plan. With the central government budgeted to spend 29.5% or RMB 1.18trn, the rest is being financed by bank lending to local governments and infrastructure investment corporations. This lending has formed the backbone of this year’s extraordinary bank lending binge, which saw bank lending jump by 34% in the first seven months of the year.

Inevitably, a surge in government-inspired investment, especially in infrastructure, has provided the key impetus to growth. Overall, fixed asset investment (FAI) has risen by 34% year-to-date with infrastructure spending up a remarkable 63.5%. However, overcapacity has seen FAI decelerate in some key manufacturing sectors. But with buoyant liquidity reviving house prices, property FAI has re-accelerated. The high level of corporate deposits suggests capex will remain resilient even as credit growth inevitably slows.

Booming FAI has, in turn, prompted a progressive recovery in industrial output growth, which picked up to 10.8% y/y in July from a low of 3.8% in January / February. The continued improvement in the PMI survey and the continued wedge between orders and inventories point to stronger growth in H2.

After stabilising towards the end of Q1, exports have now begun to revive. The strength of the ISM survey points to even brisker recovery throughout the remainder of 2009 although, as of July, the value of exports was still around 22% below its 2008 peak. The infrastructure spending boom has seen import volumes recover. Combined with higher prices of commodities, imports of which have boomed, the trade surplus has fallen back sharply, helping to slow the rise of FX reserves.

And zoom in for the charts and accompanied comments, courtesy of BNP Paribas.

Does it sound different to what China-Invest asserts?

Just to add kerosene to the fire. Even the genetically bullish Citigroup Global Markets acknowledges the OVER-INVESTMENT and OVER-CAPACITY ISSUE, and wrote on 30 September:

China’s decision to tackle overcapacity could suggest the end of restrictionless investment growth since late last year. This is the first such policy adjustment in almost the past 12 months.

In an official document cosigned by several key ministries, crude steel, cement, plated glass, coal chemical, polysilicon, and wind energy equipment are highlighted as industries excessively oversupplied.

Official estimation shows that total capacity of crude steel is about 40% more than estimated demand, while cement excess capacity is about two thirds of its projected demand.

The overcapacity problem could spread to other sectors whose investment is dominated by state-owned enterprises. Moreover, corporate account receivables grew much faster than revenues in recent months, pointing to rising inventories or overcapacity economy-wide.

Oooooops! Look at yourself in the mirror! Nice growth - driven by OVER-investment!