It often appears that China’s economy is hanging together by a noodle thread. If it is hanging together at all.
Last week, after three years of pain, the National Bureau of Statistics reported that “gross domestic product surged 4.9% in the third quarter” compared to the lockdown-ravaged period in 2022. Beijing’s official target this year is 5%, so the data came as no surprise.
Indeed, the usual suspects in the state-controlled media hailed the recovery as a beacon of “high-quality development,” China Daily reported. But fiction tends to blur the facts.
“It’s hard to throw a metaphorical rock anywhere on the internet these days without hitting an article about Chinese economic statistics gone wrong,” Joe Tauke, an economics writer, reported on Salon.
“Anyone who has paid even a shred of attention to China’s official reports over the past 30 years is probably aware of the fact that they’ve consistently been manipulated, always in the same direction,” he said on Monday.
Shrouded in secrecy:
- China’s economy is as opaque as the ruling Communist Party and President Xi Jinping’s policies.
- It has become nearly impossible to separate fact from fiction with the Party monitoring every aspect of life.
- Institutions, academia, the media, and non-profit organizations are all controlled by Xi’s regime as it tightens its grip on the country.
Blast from the past: “Clearly nobody believes the data,” Sushil Wadhwani, a former member of the Bank of England’s Monetary Policy Committee, told Reuters in 2015.
Welcome to Wonderland: Erik Britton, of Fathom Consulting, went even further: “We think the numbers are a fantasy.” Even Reuters reported in 2017 that “China’s economic statistics aren’t fake enough.”
Delve deeper: Since then, the situation has deteriorated. Real estate giants Evergrande and Country Life are teetering on the brink of bankruptcy. Up to 90% of household wealth in China is tied up in property.
Behind the numbers: As for local government debt, it topped US$13 trillion or 76% of economic output last year while consumer spending and factory activity have remained weak, despite a slight September rise.
Big picture: “China [is] moving slowly toward stagnation … unless pro-competition and pro-property reforms reappear,” economist Derek Scissors said last week in a report for the American Enterprise Institute.
China Factor comment: In short, China will grow “old” before it grows “rich.” Its global influence will also wane as it tries to prop up an economy that is crying out for root-and-branch reforms.