‘Fantasy figures’ blur China’s economic reality
Donald Trump’s return to the White House next month will only increase the pressure on Beijing
Trade war winds were gusting through the halls of power in Beijing last week. With the world’s second-largest economy stagnating, China’s political elite are bracing for President-elect Donald Trump’s return to the White House next month.
Two key closed-door Communist Party meetings rushed through plans to boost domestic consumption. It came amid rising trade tensions with the United States and the European Union, crucial export destinations for Chinese high-tech goods.
The 24-member Politburo laid the foundations for “looser monetary policy.” The Central Economic Work Conference then pledged to cut interest rates and boost government borrowing. “External shocks” were the buzzwords.
They were shorthand for Trump’s campaign vow to impose 60% tariffs on Chinese exports across the board. At the same time, Beijing is locked in a war of words with Brussels over the dumping of state-subsidized electric vehicles in the EU.
“Emphasis will be placed on expanding domestic demand,” Huang Bin, the deputy director of the Guoyan Institute of Economic Research, told state-run Global Times.
“Especially amid uncertainties in the external environment, boosting domestic demand will be prioritized, and efforts on multiple fronts will be taken,” he said.
We do not know the true number of China’s real growth figure.
Gao Shanwen, the chief economist at SDIC Securities
Why it matters:
- China’s domestic economy is in the grip of deflation despite an export boom.
- Wages across the board are falling and unemployment is rising.
- Young people are struggling to find a job even with a college education.
Delve deeper: Still, amid the economic gloom, China’s President Xi Jinping insisted last week that the annual GDP growth target of 5% would be hit. It probably will under the Party’s opaque accounting system, which is structurally floored.
Between the lines: “We do not know the true number of China’s real growth figure and maybe other numbers,” Gao Shanwen, the chief economist at SDIC Securities, said at an event hosted by the Peterson Institute for International Economics in Washington.
Big picture: “[Many people speculate that] after the pandemic, those numbers may not be so accurate,” he said, as reported by Business Insider, adding that GDP is likely around 3%.
China Factor comment: We have warned that the numbers released by Beijing “fail to add up.” The property market collapse has further exposed these “fantasy figures.”