One can see that since January 2014, rail freight growth (red line) has been in negative territory, and especially deeply negative territory of roughly minus 10 percent for all of 2015, before plunging an utterly catastrophic 15 percent in the rocky month of August.
The frequently negative freight rail growth since mid-2012 is an indication of industrial overcapacity: a stunning four-fifths of freight rail in China is either coal (58%) or ores and metals (21.5%). This means that as the excess capacity has built up in recent years, the shipments of these bulk raw materials has at times fallen owing to stock buildups at factories and power plants. So no, minus 15 percent growth in rail freight doesn't mean real industrial output growth is negative; it just means a lot of raw material is still available to be processed before new shipments are needed.
So for the Gordon Chang's, Harry Dent's, Jim Chanos's, and others like the author who cited this graph the other day, a rather simple counterpoint: it's entirely possible that industrial output is still growing at 5 to 6 percent in China, as officially reported, without any productivity improvements at all, because rail shipments of bulk industrial cargo simply isn't reliably correlated with actual production and output anyway.
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