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China’s economic slowdown has significant implications for global markets, particularly shipping. Recent reports of prominent Chinese economists being silenced after commenting on the slowdown highlight concerns over the reliability of official statistics. We spoke with Arlie Sterling, President of Marsoft Inc., to gain insight into what’s really happening and what it means for the maritime industry.
Is it true that the Chinese government is silencing economists who say the official statistics understate the slump in economic activity?
That is what the Wall Street Journal reported on the 8th of January: “Xi Jinping Muzzles Chinese Economist Who Dared to Doubt GDP Numbers.” The Journal characterizes the policy as guided by Xi Jinping himself.
Does Marsoft get reliable figures on the performance of the Chinese economy?
Yes, when we look at oil consumption, steel production, exports, and other figures most relevant for shipping. Those indicators don’t necessarily align closely with official GDP growth figures, but they are corroborated by multiple independent sources. As a matter of fact, these indicators contribute much more to our research and analysis than the GDP figures per se.
What do the indicators that Marsoft tracks tell you about the state of the Chinese economy?
They tell us that the Chinese economy is in the midst of an immense transformation. Frankly, the GDP growth figures understate the scale of the transformation we see. The chart below shows how the key indicators we track – containerized exports, electricity production, steel production, and oil consumption – compare with the GDP growth figures. We look at three periods: 1999-2008, 2009-2018, and 2019-2024.
It's amazing how the Chinese economy has slowed over the past five years. Growth in most of our key indicators has fallen to 2% or 3% per year – from double-digit growth less than 25 years ago. Growth in the economic indicators we monitor has fallen much more rapidly than official GDP growth figures, although oil consumption has tracked GDP more closely.
So, does this confirm that the GDP figures are overstated?
No, not directly. It is possible that other sectors of the Chinese economy are growing more rapidly than they did earlier in the century. Private consumption or other manufacturing, for example, could have mitigated the shortfall in the industrial production indicators shown here. But it’s our impression that is not the case. Regardless, we don’t think the official GDP figures tell the whole story of the Chinese economy.
What does this mean for shipping?
China has been the key driver of international trade in all commodities for the last 25 years. These figures tell us that China will not play that role in the next 25 years. While it remains a manufacturing powerhouse, decelerating growth coupled with increasing protectionism and geopolitical tensions will threaten its dominance. If you are building a ship now, you must anticipate that India, Vietnam, Thailand, and the other rapidly growing Asian economies will be the source of demand growth.
It’s a little harder to track the economic indicators for those economies at this stage so growth in world trade is likely to become more difficult to forecast. We will just have to dig a little deeper to get the information our clients need to make the best-informed decisions.
