The perils of reporting on China's GDP
bbc.com
bbc.com
I could probably write a book about fake China.
If you get yuge <----> (those are hands far apart...) number of viewers you could get a massive book deal.
It was certainly different from what I was expecting from the news. I'd highly encourage going if you can (and layover/transit visa's in most international airports are free and don't require pre-approval).
http://carnegieendowment.org/experts/444
And Christopher Balding:
Like other China watchers, they tease economic reality out of ancillary economic data that is difficult to spin (eg. capital outflows, HK-China cross-border trade, energy consumption).
The picture is not good. Reforms are needed, to increase low and middle-class domestic consumption; and perhaps a trillion? in non-performing loans must be written off. The rules for foreign trade and investment in China need to be rewritten to allow for unrestricted foreign competition and investment in the broadest of terms. In sum, system inefficiency in China markets must be rooted out quickly to avoid a much worse crisis.
The zombies are semi-dead entities (whether full corporate, or corporate-state). They tend to perpetually eat capital, frequently need new bailouts, get in the way of progress and growth in the economy, and they tend to survive by politics (by necessity, as they're failed entities) rather than serving customers or providing a good product etc.
All of that is based on the premise that the rest of the worlds financial industry are willing to let them collapse. Is that REALLY an accurate premise to work from? I think the aftermath of the mortgage crisis says otherwise.
As it is, the government owned businesses that have employees who do nothing are a form of welfare - its just they can't call it that - switching the columns from "employment and having revenue of X" to "payments to unemployed workers" could have a significant impact in the morale and productivity of people actually working.
Lemon socialism ( https://en.wikipedia.org/wiki/Lemon_socialism ) and zombie company ( https://en.wikipedia.org/wiki/Zombie_company ).
Granted, last year's news: [Massive layoffs coming as China confronts its overbuilt 'zombie economy'](http://www.cbc.ca/news/world/china-zombie-economy-layoffs-pe...) has it at 6,000,000 workers which could cause some significant instability with it that the government is trying to manage (granted, its by ignoring it and continuing to pay the workers despite oversupply).
Laying off 6M people will hurt many others and needs to be watched for when it does happen.
Writing off bad loans can allow reform of the failed business, selling assets, redeploying labour, allowing it to be restructured or supplanted by successful competitors, rather than allowed no it to limp on as if nothing was wrong. Ongoing inefficient businesses propped up by bad loans are also an abstacle to innovation and improvement in efficiency and services.
Yes writing off the loans incurs a cost, but if the economy and tax base grows faster than the interest on th debts this isn't a long term problem. Eventually growth and inflation erode the problem away. But not recognising the bad loans means continuing to financially support the failing business which is an increasing ongoing cost.
I presented it in a class full of kids of rich Chinese expats studying at BCIT back then, and I was laughed off even by an instructor who was a brilliant mind, and had a very anti-red political stance.
Two years later, an Econ proff from UBC asked me for a reprint permission. Now, i have randoms buzzing me quite often just to get to know if i had some "behind the scene" knowledge.
What surprised me the most was that my former classmate introduced me to her father (a rather rich Chinese businessman), as "the most smart guy in the class" and pretty much tried to drag me into his company.
Now I work in China, but not with them.
Ask most non-China watching Americans, and they'll tell you that they're more innovative than the U.S. and we should be more like them than they to us and focus on the economy instead of human rights, which by the way is exactly what the Chinese party line wants.
Which I always found funny since we're actually pretty eager to doubt our own government (some even believe Washington is more corrupt than any other foreign country) and downplay our own achievements/ point out our own flaws.
Westerners often don't know where to look for problems. For example, the walled-off hutongs in Beijing during the 2008 Olympics were cordoned off because they are prime luxury real estate being renovated, not because they were slums. The irony is that the Chinese did a bad job preserving enough of those old courtyard homes.
There is both casual and acute corruption in China, and that is hard to cover in the news. Concealing corruption is in nearly everyone's interest. Nobody will like you for uncovering it.
These two things together made the cost of doing business here prohibitive, unless your business is not real estate speculation. Local electronics businesses closing one after another. The famed Shanzhai garage companies fared even worse than established businesses. There not a single one left now. They died to phenomenal brain drain levels, costs, market saturation, US an EU domestic consumption going down, and people leaving for "cheaper and easier live abroad"
Living abroad can actually be cheaper than china, especially for middle class Chinese who want public education for their kids, a nice car, a house at a more decent price, oh and clean air (SZ is better than most, but still not good by developed world standards). It really is no wonder there are still so many Chinese immigrants coming into the states even with China's "success".
Life is weird.
"Investing" was very much like the dot com days, everyone wanted in and over payed for securities.
And in spite of all the shenanigans in the numbers a lot of infrastructure that is useful is built, and while it might be over built its easier to use excess capacity than it is to create marginally more infrastructure. So all in all its a win for China.
Likewise with residential buildings, China's low tech/skill approach to building means these buildings require more maintenance and begin to look dipilated only a few years after they are built. People talk about Kangbashi (Ordos New Town) eventually filling up, but the clock has been ticking for 5 years already, the infrastructure of a ghost city won't last that long.
And then there is the infrastructure that isn't built but badly needed. Billions for HSR but nothing for decent drainage so cities don't have huge floods whenever it rains heavily. Or what about some water treatment plants to clean up the water? China is rife with such contradictions.
How much have the numbers been changed?
Whole of the Indian market is flooded with Chinese items. I see most of the stuff I buy in US comes from China as well. I am not even talking about things like iphone. I am talking about everyday stuff one uses like clothes, shoes, etc. All the wealth is flowing into China in exchange for those goods which increases their GDP. China is also making huge investments in Africa & Pakistan. They are exploring new markets for selling its cheaply manufactured goods.
The Economists claim that those numbers are fake are not aware of ground reality. I don't see China slowing down in the near future, at least no in the next decade.
What you just said, and what I just said, should be switched around and I think the primary reason why that isn't the case is because Credit Agencies now come with a "Public Bailout" parameter.
The entire system is just made up to suit those with the golden pens. Reality is long gone.
>I don't see China slowing down in the near future, at least no in the next decade.
The Chinese government, from the top down, has been saying for years that the economy is slowing down.
You think that saying anything bad about China is being anti-China. So objective reporting would only say good things about it? And patriotic Chinese would think only positive things about their nation? You know, you can't solve problems unless you first acknowledge them.