Episode summary
China's economy is much weaker than the data would normally suggest, says Leland Miller
Summary
China’s economy is far weaker than the headline data suggest, according to Leland Miller. He said China Beige Book’s latest reading showed one of the worst quarters in years, with weakness spread across regions and sectors and retail falling sharply, even if the economy did not deteriorate much further from Q2 to Q3. Miller argued that strong exports and mixed official data can obscure the bigger picture: domestic demand remains very soft, and the economy is still under pressure from the fallout around the Strait of Hormuz and rising input costs.
Miller said China is running out of growth drivers. The old model built on exports, infrastructure spending and property is losing power, while the hoped-for rebound in consumption has not materialized. He expects margin pressure to intensify into Q4 as upstream cost increases work through the system. He also suggested Beijing may rethink its property restraint and try to rehabilitate property as a growth engine going into 2027, which he called a highly political year for Xi Jinping.
On Taiwan, Miller did not see a near-term move. He said there is medium-term risk and the U.S. should remain vigilant, but Beijing does not appear eager to escalate over the next two years given the state of the economy and leadership changes.
Key takeaways
- Miller said China Beige Book’s Q3 data showed "some of the most horrific data we’ve seen in a long time," with weakness across nearly every region and sector except property.
- He argued China’s export strength is masking a much softer domestic economy, and that the export model is topping out.
- Miller expects more margin pressure in Q4 as commodity and agricultural input costs flow downstream.
- He said Beijing may loosen its property crackdown and use property again as a growth lever ahead of 2027.
- On Taiwan, Miller sees medium-term risk but does not think Beijing is eager to act in the next two years.
Notable quotes
“THE ECONOMY IS ON A MUCH WEAKER TILT THAN ANY OF THE HEADLINE DATA OR ANY OF THE EXPORT DATA OR OTHERS WOULD NORMALLY SUGGEST”
“THE MODEL IS EFFECTIVELY DEAD”
How the episode opens
Have to take a closer look and see exactly what investors are keying off here. But again travelers shares right now down by about 4.6%.
And recent economic data showing a mixed picture in china. Exports in september jumped 36% from a year earlier. A lot of that came from tech components for data centers, domestic spending in china, less robust retail sales are sluggish, and spending on travel just hit a four year low.
The three big china focused etfs are all down double digits this year. Meanwhile, new data from China Beige Book pointing to one of the worst quarters in recent years, with more trouble ahead in 2027. Joining us now, China Beige Book ceo Leland Miller.
Leland, we you know, we could pour over our own beige book for hours. So, you know, we may neglect the details that you can bring us for what's happening in china. What are the three overriding points that that were apparent in this latest beige book?
Yeah, I think that if you focus in on 1 or 2 data points, like strong exports or the fact that things didn't get that much worse between q2 and q3, you might be left with a with the idea that the economy is okay, but this is actually some of the most some of most horrific data we've seen in a long time. You know, the economy didn't get worse from q2, and that's good. But if you look at all the on year data, they just fell off a cliff.
It's weakness across every region, across every sector except property. Retail fell off a cliff. So, you know, what you've seen is, is the, the problems that china went through in q2, some of them hormuz related have not gotten worse, but the economy hasn't gotten better.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- china economy
- slowdown drivers
- iran war impact
- 2027 outlook
- china data weakness
Companies and tickers mentioned
- China Beige Book
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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