At this point, I should probably apologize to Beijing for beating the dead horse that is Chinese domestic demand.

I’ve belabored the point beyond the diminishing returns threshold, but it’s kinda important, the Chinese economy being the world’s second-largest and such.

Last week’s data deluge found the Party insisting the economy met Xi Jinping’s growth target in 2024, even as analysts and economists openly questioned the numbers. The CCP’s likely to suggest growth will be 5% again this year, even as Donald Trump takes aim at the country’s exports. If China’s going to weather that storm, they’ll need to revive domestic demand.

Currently, the consumption impulse is moribund on good days and plain old dead on all the others, notwithstanding what I’ve recently noticed are efforts by a handful of “X” accounts to suggest otherwise with videos of Chinese shopping.

In the context of Western governments’ efforts to knee-cap China’s exports, there’s a sense in which that’s an exercise in cutting one’s nose off to spite one’s face. Have a look at the chart below, from SocGen:

Credit growth in China’s quite lackluster these days despite low rates and a PBoC that’s trying to be accommodative. Long story short, there’s no demand for credit, which means the PBoC’s pushing on the proverbial string. If you plot the Chinese credit impulse on a lead with a composite OECD activity indicator, you come away wondering whether the latter can continue to defy gravity.

Again, it really is important that the Chinese government come around to the necessity of acting as a spender of last resort. The problem isn’t the cost of credit/money, which means the PBoC’s efforts to boost lending are an exercise in futility. China’s staring at a balance sheet recession. Households are trying to de-leverage, so trying to force-feed them cheap credit won’t work.

Last week’s data suggested the Party had some success with their version of “cash for clunkers” in Q4, but that’s not sustainable. “Markets remain skeptical about China’s data quality, but at least directionally the strength is consistent with other measures including our current activity indicator,” Goldman’s Jan Hatzius said Monday.

As the chart header notes, Goldman doubts China will be able to sustain Q4’s growth pace which, annualized, worked out to 6.6%.

“We expect growth to slow anew to 4.0% (annualized) in Q1, in part because of the pull-forward effect of the cash-for-clunkers program mechanically weighs on subsequent growth,” Hatzius went on, adding that financial conditions are still “relatively tight despite the government’s easing efforts.”

Again, one does have to wonder where the growth’s going to come from globally (i.e., in aggregate) in the event China can’t pull it together on the domestic demand front, Trump torpedoes Xi’s export machine and the US economy suddenly runs out of gas. Food for thought.