With GDP down, is China in crisis?

China's economy slowed to a new three-year low. Photo: Aly Song / Reuters

How bad is the economic crisis in China? It's a question many economists will struggle to answer mainly because Chinese official GDP figures are widely mistrusted. Even the Premier in waiting Li Keqiang is reported to have once described China's GDP figures as 'man made'.

Today's Second Quarter GDP figure is 7.6%, down from 8.1% in Q1 and you have to go back to the tail end of the global banking crisis before you see quarterly figures as low as that.

So we have to look more closely at other figures to see if we can get a more accurate reflection of just how bad things are.

This week I spoke to Chen Zhiwu, a leading economist and on the board of China's largest oil company, PetroChina, he says last month diesel sales were down 10% compared to June last year.

Mr Chen told me:

So we know diesel is mainly used by transportation trucks and other heavy duty machineries, so if there is such a relatively dramatic decline in usage of diesel fuel in China that really tells you something. There's no doubt the Eurozone has already had a major impact.

Labourers work at a steel manufacturing plant in Hefei, Anhui province. Credit: Reuters/Stringer

Indeed in the thousands of factories in Southern China, the famous 'factory floor of the world', orders have plummeted. One boss says he didn't think " it can get worse".

Coal stocks are piling up, unsold, suggesting electricity usage has fallen.

I recently walked around a massive building site on the outskirts of Beijing, work was a standstill, a handful of underemployed labourers saw around staring at the screens of their phones as if hoping for the call to resume work.

Large property firms are failing, the legacy of the huge amounts of cash umped into the economy during the global banking crisis. Billions went into building apartments, roads and railways. Demand didn't match supply.

The ghost town image of the building site isn't what the world's second largest economy is meant to look like. If China, the great global growth generator, is in deeper trouble than the official stats suggest then we should all be very worried.