Like in many other emerging-market economies, China's official economic data leave a lot to be desired. Foreign companies considering a China play involving inward-bound investments need to ponder this fact with great care. Beijing should also come to the realization that economic numbers provided by governments require the same conditions of transparency required of private enterprises.
Trapped in the mind-set established under central planning, Chinese officials tend to offer numbers to make the central authorities happy instead of offering accurate data. This is evident in a report by China's National Bureau of Statistics that uncovered more than 62,000 violations of regulations on collecting and compiling economic figures in 2000.
Only Chinese data on the money supply and trade are considered reliable because they can be cross-referenced against data from trade partners. Meanwhile, fundamental measures like GDP growth and unemployment figures are of dubious quality.
The official unemployment rate is wildly understated by counting only the registered unemployed in the cities. The entire rural population and many blue-collar workers like those put on temporary leave because of poor performance of their enterprises are left uncounted. And only workers that are recently laid-off are counted while those engaged in new job searches are not.
From 1995 to 1999, the number of state-owned enterprises engaged in industrial activities fell to 60,000 from nearly 100,000. Yet the number of unemployed workers in urban areas during that same period rose from 2.9 percent to 3.1 percent. More recently, reports of over 5 million workers being shed by state-owned enterprises resulted in only slightly larger increases the reported jobless rate for urban areas, from 3.1 percent to 3.6 percent.
Data on GDP are scarcely better. Although China has a less advanced system of national income accounting, it quickly released final numbers on last year's growth that indicate growth of 7.3 percent. Not only do these figures defy the logic of an ongoing global slowdown, they do not appear to be internally consistent. A frequently cited inconsistency is that the usage of electrical power suggests substantially less would be consistent with the official growth estimates.
China has become the second-largest recipient of foreign direct investment in the world, after the US. Foreign investors rely heavily upon data recorded by local statisticians concerning market conditions. So legitimate questions arise whether billions of foreign-investment dollars were spent wisely. A partial answer is that the wide majority of foreign investors either loses money or is far behind in its projections on return on capital.
Without reliable and independent corroboration of official data, a useful rule of thumb should be applied to authoritarian regimes. This is to double the numbers relating to bad news and halving those that report something good. This would put the actual economic growth closer to 4 percent or possibly less.
Even this might not be enough of an adjustment. Some outside observers estimate that China's actual urban unemployment is closer to 15 percent or even 20 percent.
Beijing has openly recognized the need for improved data collection and processing and has employed foreign consultants to oversee the development of such methods. The National Bureau of Statistics has agreed to adopt data systems recommended by the IMF.
Of course, there have been some adjustments and improvements in data quality. Dai Xianglong (戴相龍), governor of the People's Bank of China, has offered a clearer look at the mountain of bad debt held by state-owned banks. It is now apparent that nonperforming loans account for just over 26 percent of total lending from the big four state-owned banks with most of the delinquent borrowers being state-owned enterprises.
However, analysts believe a more accurate proportion for nonperforming loans is 50 percent. If Beijing cannot come clean about the extent of these loans, it may not be able to muster the political will to demand job cuts and management changes as well as the liquidation and sale of assets needed to purge bad loans.
Despite a rosy picture painted by China's data gatherers, there are tough times ahead for the Middle Kingdom. Unless they come clean soon, the leaders in Beijing might be overseeing the equivalent of an Enron meltdown on a national scale.
Christopher Lingle is global strategist for eConoLytics.com and author of The Rise and Decline of the Asian Century.
With escalating US-China competition and mutual distrust, the trend of supply chain “friend shoring” in the wake of the COVID-19 pandemic and the fragmentation of the world into rival geopolitical blocs, many analysts and policymakers worry the world is retreating into a new cold war — a world of trade bifurcation, protectionism and deglobalization. The world is in a new cold war, said Robin Niblett, former director of the London-based think tank Chatham House. Niblett said he sees the US and China slowly reaching a modus vivendi, but it might take time. The two great powers appear to be “reversing carefully
Taiwan is facing multiple economic challenges due to internal and external pressures. Internal challenges include energy transition, upgrading industries, a declining birthrate and an aging population. External challenges are technology competition between the US and China, international supply chain restructuring and global economic uncertainty. All of these issues complicate Taiwan’s economic situation. Taiwan’s reliance on fossil fuel imports not only threatens the stability of energy supply, but also goes against the global trend of carbon reduction. The government should continue to promote renewable energy sources such as wind and solar power, as well as energy storage technology, to diversify energy supply. It
Former Japanese minister of defense Shigeru Ishiba has been elected as president of the governing Liberal Democratic Party (LDP) and would be approved as prime minister in parliament today. Ishiba is a familiar face for Taiwanese, as he has visited the nation several times. His popularity among Democratic Progressive Party (DPP), Chinese Nationalist Party (KMT) and Taiwan People’s Party (TPP) lawmakers has grown as a result of his multiple meetings and encounters with legislators and prominent figures in the government. The DPP and the LDP have close ties and have long maintained warm relations. Ishiba in August 2020 praised Taiwan’s
On Thursday last week, the International Crisis Group (ICG) issued a well-researched report titled “The Widening Schism across the Taiwan Strait,” which focused on rising tensions between Taiwan and China, making a number of recommendations on how to avoid conflict. While it is of course laudable that a respected international organization such as the ICG is willing to think through possible avenues toward a peaceful resolution, the report contains a couple of fundamental flaws in the way it approaches the issue. First, it attempts to present a “balanced approach” by pushing back equally against Taiwan’s perceived transgressions as against Beijing’s military threats
RSS