China 3Q GDP comes in at 6.9 percent

Bloomberg: 6.9 pct growth slowest since financial crisis but eases fears of significant slowdown

This was probably the only politically acceptable figure for Beijing to report for the July thru September quarter...it was such a tumultuous period for global perceptions of China that an otherwise relatively unremarkable if downbeat (by Chinese standards) quarter acquired a profound significance for market sentiment on every continent. This 6.9 percent was the only "not too hot, not too cold" figure that would tell the world, "we know 7 percent is out of reach, but we're holding up pretty well nonetheless since we eked out something above the 6.8 percent international consensus estimate."

There's no question that the headline GDP figure is as much political as economic; on the other hand, it's wrong to think, as the China "perma-bears" all but assume, that it's simply fabricated by old-fashioned communist apparatchiks tasked with hiding a giant Potemkin village.

Gordon Chang, author of the 2001 book The Coming Collapse of China, has been foremost among the China bears for years; he was at it again in a video in which he repeats his recent claim that China is currently growing at barely 1 to 2 percent.

Chang is a good barometer of China skepticism. Although China's economy is nearly 10 times bigger than it was when he claimed back in 2001 that it would collapse within the decade - thus putting a dent on his credibility - in fact some of the most critical systemic problems China faces have not changed in 14 years.

Even if Chang is correct about 1 to 2 percent growth currently, that may only be because - as even he admits in the interview - that past years of rapid expansion understated actual growth, meaning that present growth is being generated from a larger base than previously thought. An AP article notes as much:

"Beijing is measuring a 2015 economy using a 20-year-old framework," said Daniel H. Rosen and Beibei Bao of Rhodium Group, a research firm, in a report in September.

The government didn't collect data on thriving service industries until 2005. Once it did that, the official size of China's economy abruptly increased by 17 percent, propelling it past Italy as the sixth-largest.

In their report, Rosen and Bao said Chinese data still fail to reflect the true value of real estate, retailing and other service industries, as well as of research and development.

Rosen and Bao suggest China's antiquated system might hide the fact that its economy, due to overtake the United States as No. 1 in the next decade, is at least $1 trillion bigger than reported.

IMHO, China and its communist regime are not on the brink of collapse...if anything, an actual GDP growth of only 1 to 4 percent at this time could be a sign of remarkable strength and resilience, given that there are few signs of a significant uptick in social unrest.

That being said, Gordon is still right that the RMB remains significantly overvalued...he mentions a potential devaluation of 10 percent in the near future, which is far below the 30 to 50 percent I personally believe possible. And this is where I take most issue with his reasoning: given that the RMB is so ridiculously overpriced against the dollar, this massive deflationary threat to the global economy and especially to the advanced economies like the US gives Beijing tremendous leverage.

It's a topic I'll return to at some point in future...Chimerica is double-edged in nature and just as Washington constricts Beijing's freedom of action, so does Beijing constrict Washington's.