Financial services grows 16% YoY: big support for offical 6.9% growth

China's financial services sector grew a torrid 16.1 percent in the supposedly disastrous third quarter, according to Dow Jones. This goes a long way to explaining the overall 8.6 percent growth in services and makes the official 6.9 percent GDP increase in 3Q more credible.

Of course, China bashers will be all over this supposedly fake or fudged figure, but it's actually pretty easy to believe. These two paragraphs are the key:

While the benchmark Shanghai Composite Index tumbled to 2850.71, its lowest point in the collapse reached on August 26, trading volume also fell 25 per cent in the third quarter from a quarter earlier, according to data provider Wind Information Co. 

HSBC economist Ma Xiaoping said an accelerated increase in bank credit likely aided the financial sector's stronger performance and "may have offset some impact from market volatility." 

So we have reputable international industry sources saying that the financial sector didn't quite plunge into the abyss, after all. A 25 percent contraction in trading volume would still put such volume at a considerably higher level from the same period a year earlier; the increase in bank credit is rather substantial in the official stats:

The growth of outstanding bank loans also picked up in the third quarter to 15.4 per cent from a year earlier, up 1.6 percentage points in the second quarter and 2.13 percentage points from same period last year, according to official data. In September, Chinese banks issued the highest amount of new credit on record for the month. 

Further data confirming a pickup in the real estate sector, if even somewhat slower than in 2Q, would also bolster the case for continued impressive growth: real estate remains a substantially bigger chunk of the economy than equities.

So now, the Gordon Chang's and Jim Chanos's of the world must make the case that sector data is being fudged all across the board, not simply in bits and pieces that leave glaring holes and inconsistencies.

Their next exercise should really be to determine the rate of electricity output growth related to the financial services industry: but it makes one wonder how childish their math skills are if they equate a 1 percent electricity growth to a 1 percent finance sector growth. I mean, one can easily see that even if all the additional stock trades compared to last year translates to a 10 percent increase in electricity consumption by stock-related servers and other electronics, this wouldn't do much to pull up the overall national consumption growth if far more energy-intensive sectors like manufacturing are exhibiting flat or negative growth.

That being said, it's true that the 5 or 6 percent growth in manufacturing - still a massive sector - doesn't square with stagnant or contracting electricity usage. Something to look into more carefully, IMHO...Chinese factories should be getting more efficient over time, and perhaps one year is a long enough time frame to notice some improvement; if so, the low electric growth could actually be another good sign, considering how notoriously wasteful of productive inputs Chinese factories were not too long ago.