President Xi’s ultimate weapon is total ‘control’
China’s economic numbers and the trade war with the United States will not give him sleepless nights
Does President Xi Jinping agonize about China’s economic growth? Probably not. Does he have sleepless nights about the trade war with the United States? Again, unlikely.
What he does care about, though, is “control and stability,” and that means a “stable economy controlled by the state,” or the ruling Communist Party of China and his red mandarins.
Too simplistic? Not according to academic Derek Scissors at the American Enterprise Institute, or AEI, and chief economist of the China Beige Book, a research and data company.
“Economic growth is nice, it’s not close to paramount. China no longer needs fast growth to create jobs, with the labor force contracting since at least 2017,” he pointed out.
“On official figures, growth is tenuously connected to job creation. This is another reason not to care much: results will be whatever Beijing wants,” Scissors wrote in a commentary for AEI.
“China has offered decades of dubious economic statistics, eagerly repeated by many. It just happened again, with [first quarter] data not making arithmetic sense,” he said last week.
The biggest error made is believing Xi is interested in what commentators think.
Derek Scissors, American Enterprise Institute
Data trap:
- Officially, Q1 GDP growth hit 5.4%. But domestic demand is still anaemic after the property crisis “destroyed US$18 trillion” or 70% of household wealth.
- Urban unemployment continues to be pegged around 5% despite an AI and automation boom. Yet those aged between 16 and 25 have been hit with the jobless rate ballooning.
Delve deeper: The numbers were also greeted with skepticism by China Business Spotlight. “Growth of 5.4% is real growth. Nominal growth is only 4.6%. In a normal economy, nominal growth should be higher than real growth,” the trend-setting blog reported.
Between the lines: “This is because real growth means nominal growth minus inflation. [Yet] the economy is growing so fast because the country is in a deflationary state. Consumer prices are falling, purchase prices are falling, company profits are falling,” CBS stated.
Big Picture: Economist Scissors went even further, highlighting the frenzy generated by the release of key economic numbers from the National Bureau of Statistics.
Bottom line: “The biggest error made is believing Xi is interested in what foreign commentators think he should be interested in – economic growth, the welfare of households, stock prices, high American tariffs. None are especially important for Xi,” he said.
China Factor comment: In the end, control is Comrade Xi’s ultimate weapon. Control of the Communist Party and the military, as well as an iron grip on everyday life in China. A trade war “at the present level is a secondary issue.”