China non-fact of the day

China’s economy is about 12 per cent smaller than official figures indicate, and its real growth has been overstated by about 2 percentage points annually in recent years, according to research. The findings in the paper published on Thursday by the Brookings Institution, a Washington think-tank, reinforced longstanding scepticism about Chinese official statistics.  They also add to concerns that China’s slowdown is more severe than the government has acknowledged. Even based on official data, China’s economy grew at its slowest pace since 1990 last year at 6.6 per cent.

That is from Gabriel Wildau of the FT — adjust your debt to gdp ratios accordingly.


A totalitarian regime lying? I'm shocked.

On matters economic they all lie. Do you believe the official US unemployment numbers or inflation numbers?

(By "believe" I mean do you believe that they faithfully represent what they purport to represent. I don't mean "do they lie about the arithmetic?" Of course they may, but that's probably less important than the unrepresentativeness.)

It is different. The truth may bent here or there, but it surely doesn't approach the systematic lying of Xi's regime. As President Captain Bolsonaro has said many times, "And ye shall know the truth, and the truth shall make you free."

I coulda sworn that was Jesus?

Evidently, President Captain Bolsonaro was quoting the Gospel of John. My point is, some leaders welcome the Truth, others, such as tyrant Xi, don't.

"Do you believe the official US unemployment numbers or inflation numbers? "

All national economic statistics are just surveys.

I hear the physics they teach in schools these days is just based on surveys of atoms. I mean, we're just supposed accept that the charge on every electron in the sun is 0.000000000000000000160217662 coulombs? That's just pure assumption.

Sorry, I'm being too critical, aren't I? Sometimes I just feel the need to blow off steam. It's because I'm always running hot and under pressure.

"I mean, we're just supposed accept that the charge on every electron in the sun is 0.000000000000000000160217662 coulombs? That's just pure assumption."

Not for two months, until then it is approximate, an estimate:

This charge has a measured value of approximately 1.6021766208(98)×10−19 C[1] (coulombs). When the 2019 redefinition of SI base units takes effect on 20 May 2019, its value will be exactly 1.602176634×10−19 C by definition of the coulomb.

They figured out Avogadro was a finite constant, we live in a finite world.

If China is a totalitarian regime, then why is the whole world including the USA and Brazil trading with them? China is even building Brazil's infrastructure, something the US wouldn't let them near.

We are playing the long game and bidding our time.

Damn - I was going to say 'Communists lie? Who knew?'

Then point out how lucky the U.S. is that former KGB member Putin is not a Communist anymore, so we can trust what he says.

How is the Nord Stream 2 pipeline coming?

Increased dependence on Putin and screwing the Poles, all in one nice package.

Not just the Poles - Nordstream 1 and 2 are intended, in part, to not rely on the Soviet era gas network in Eastern Europe. This means, for example, that no one in the middle can steal natural gas.

Besides, considering the decline in Western European natural gas production, where do you think Germany is going to buy natural gas from? The U.S.?

You're worried about Poland and Ukraine "steal(ing) natural gas"?

Pioland not so much, but you are aware of this, right? 'The Russia–Ukraine gas disputes refer to a number of disputes between Ukrainian oil and gas company Naftohaz Ukrayiny and Russian gas supplier Gazprom over natural gas supplies, prices, and debts. These disputes have grown beyond simple business disputes into transnational political issues—involving political leaders from several countries—that threaten natural gas supplies in numerous European countries dependent on natural gas imports from Russian suppliers, which are transported through Ukraine. Russia provides approximately a quarter of the natural gas consumed in the European Union; approximately 80% of those exports travel through pipelines across Ukrainian soil prior to arriving in the EU.'>/a>

Basically, Germany is looking to save a few billion euro a year by having a direct connection to its Russian natural gas connection. Strangely enough, that is the amount that various East European transit countries would lose if the German natural gas supplies are delivered through Nordstream.

Who knows? If the UK would become a natural gas exporter again, Germany would be interested in a UL Stream pipeline. 'he UK currently produces enough gas to meet almost half of its needs (44%) from the North Sea and the East Irish Sea.

We also import 47% of the gas we use via pipelines from Europe and Norway. The remaining 9% comes in to the UK by tankers in the form of Liquefied Natural Gas (LNG).'

Which came first: China lying about the strength of its economy, or the US?

Which came first, the chicken or the moment you stopped beating your wife?

Based on energy calculations (communist countries are about 33% less efficient than capitalist countries with energy) I estimated that China's GDP is overstated by 33%. I also estimate their population is overstated. Put together these two facts and you get China's GDP is about 50% of the official figures. Thus, all in all, China is roughly three times the GDP of France, not nearly equal to the USA's GDP.

Bonus trivia: around 2012, China's foreign tourist spending dramatically spiked upwards, and surpassed the world leader the USA, and today they are nearly double the US figure for foreign tourist spending ($250B for Chinese tourists vs $140B for US tourists). It's estimated this was done for 'soft power' purposes, on government mandate.

China has to provide approximately 4 times more food and shelter to its population than the U.S. does. It's the world's largest manufacturer and trading nation. It's by far the world's largest auto market (25 million annual sales vs 17 million in the U.S.). It consumes half of the world's steel and concrete. I would say it's quite possible that China's economy overtook America's in 2014 in PPP terms as IMF claimed and is now 20-25% larger than America's in PPP terms.

If the paper is right, then China's GDP (PPP) was $21.6 trillion last year and the US GDP (PPP) was $20.4 trillion

@cbu - " It's by far the world's largest auto market (25 million annual sales vs 17 million in the U.S.)" - not true, I don't believe it. As recently as 10 years ago China only reported 10M commercial and non-commercial vehicle sales, see: I doubt that many sales have come forth. Since vehicle sales are a state statistic, I don't have much faith that the numbers are accurate.

I believe the number is correct, although last year was only 23 million or so. There is no incentive for auto maker's to inflate their sales numbers if they do not want pay more tax, unless they hope that doing so would increase their stock price.

Or to funnel money out of the country. Debts must be payed.

Ray, I don't think China spends 100% of its GDP on energy. Also, if you go there you see a lot of new stuff and new stuff tends to be efficient. For example, their fleet of coal fire power stations is probably the most efficient in the world.

@Supercritical - the assumption is not 100% of GDP on energy but that energy usage and GDP are linearly correlated.

GDP and energy consumption only closely correlate up to a point and -- partially due to having up to date technology -- China's economic GDP and energy consumption have been decoupling.

Here's a graph for some developed nations of energy consumption per capita vs. GDP per capita:

@Supercritical - thanks, I'll check that. Yes, decoupling is the modern trend, and my analysis was done in the 1990s, I self-published it on Usenet, and subsequently some professor said the same thing using different techniques (about energy usage and GDP, my population conspiracy thesis is still unproved).

@Supercritical - looked at the thread and it proved nothing, in fact, the opposite. Only mention of China was this: "That analysis could just be demonstrating that off-shoring of energy costs to other countries not included in the analysis. That is, we just get China to do all of the manufacturing for us and we generate GDP on higher end services and information." - that is, it's not clear whether China itself is following this non-linear "more GDP for the same energy" relationship. How do you know whether China, being state controlled and having cheap coal for energy, is not simply becoming the 'workshop of the world" and doing the dirty, energy heavy and inefficient manufacturing (not the energy light and efficient 'designing' which the G7 is good at) for the rest of the world, as the thread excerpt above suggests? As I say, if anything this proves my thesis. Jury still out. China is a giant with feet of clay.

China has cheap energy? Actually it's fairly expensive. If you look at what large industrial users in Canada and the US pay you'll see in general it's considerably less than what they pay in China.

What would make you think energy in China is cheap? Look at how new their generating infrastructure is. While the cost of Chinese labor and engineering is still cheap by the standards of a typical developed nation all those supercritical coal power stations are expensive and the cost of industrial electricity is pitched at a price that reflects that.

Have you ever taken a gander at any of the Wikileaks China cables? This one also talks about determining economic status thru energy consumption, among other things.

"4. (C) GDP figures are "man-made" and therefore unreliable,
Li said. When evaluating Liaoning's economy, he focuses on
three figures: 1) electricity consumption, which was up 10
percent in Liaoning last year; 2) volume of rail cargo, which
is fairly accurate because fees are charged for each unit of
weight; and 3) amount of loans disbursed, which also tends to
be accurate given the interest fees charged. By looking at
these three figures, Li said he can measure with relative
accuracy the speed of economic growth. All other figures,
especially GDP statistics, are "for reference only," he said

Wanna know something else?

It is believed that China's 'dark lending' sector could account for almost 15% of their GDP (USA's is something like 6% which is still bad even though it's lower).

Bail-out, Bail-in, Bail-the-hell-outta-there quick!

China is a potentially enormous market for American made goods, but America is caught between exploiting China's relatively low cost to produce goods for American firms and America's wish to suppress China firms from selling goods made by and for China firms to America and Europe. Now that China is producing goods for China firms to compete with goods made by and for American firms, including goods made in China for American firms, America is totally confounded. The Trump administration responded in trade negotiations by demanding that China relinquish its sovereignty to America (by the demanding that China not subsidize China firms). That didn't work out so well. America's trade deficit has soared during the trade war. So now America resorts to charges of espionage, demanding that neither American firms nor European firms do business with Huawei, the China firm that is the largest producer of smart phones and the sophisticated telecommunications equipment to support 5G. European countries aren't falling in line because they want to buy Huawei's telecommunications equipment. So here we are, debating the rate of growth of the China economy, while China races past America in telecommunications equipment and AI. America got the government its fine folks elected.

Yet China's growth rate has been high for years. We aren't specialist manufacturers; we are emergency contractors. Russian dolls are great. Russian dolls will get you 9% growth. Meanwhile, the fast food market in America continues to grow at 2%. ''We don't spend a lot of time worrying about Brand X or Brand Y,'' said Richard G. Starmann, senior vice president. ''We don't do anything on the basis of what the competition is doing.''

In my estimates the ratio of China to US GDP in 2017 was 1.07 while the world bank estimated it to be 1.20. So this discrepancy from official statistics is already incorporated in serious scholarly studies. Maddison himself adjusted Chinese GDP growth by 1.8% downward from 1978 to 1998.

Does this mean we won the trade war?

If those economists are correct, China's GDP per capita was $15,000 last year. If it grows at 5% for ten years then at almost $25,000 in 2028, the same as Chile today and where Japan was in 1982 (minus smartphones).

Which is nonsense. China's GDP is over $10k a year only on "PPP" basis, which is a Third World metric designed to make developing countries feel good about themselves. Put another way: a pizza in New Jersey is not the same as a pizza in some cheesy Asian chain, even the Dominoes, Pizza Hut or Shakeys chains they have in the Philippines. Sorry, but the only metric that matters is GDP in nominal exchange rates on an international market. How much "gold" a country can buy working for one year. By that metric, China is still less than $10k USD/working person. Outside of Shanghai, Beijing/Tiangen region, Canton region and the Chendu/Chongking regions, you got nothing worth mentioning in China; it's not that much different than the yurt tent cities of Mongolia. I speak as an expert, having visited Beijing over 10 years ago, as well as Hong Kong (it was nicer than I thought) a few years ago.

I'm an expert on the Philippines, because a good friend of me was stationed at the Clark Air Base in the late 1960s.

And I also like nata de coco.

Other than that, I do agree money is neutral, and PPP is BS when used beyond its applicability, which is comparing hand to mouth living between different locales.

@Viking - thanks, great minds think alike. Clark Air Base was a slice of America in PH--clean, wide roads, no overcrowding. The Filipinos shot themselves in the foot when they kicked out the Americans, that was a money maker (the volcano blowing up the same year did not help either). PPP is indeed for those living on $1 a day. Money is indeed largely short-term neutral, as the real business cycle people tell us, but even I agree during hyperinflation money is not neutral at all. The WSJ had the other day an article about how a prosperous shoe making company in Venezuela is nearly empty due to hyperinflation, it distorts price signals not to mention fools people with money illusion. Literally it's the 'shoe leather costs' of hyperinflation as any econ textbook will teach you.

"Which is nonsense. China's GDP is over $10k a year only on "PPP" basis, which is a Third World metric designed to make developing countries feel good about themselves. "

You are as clueless as Cowen who doesn't understand PPP.

I thought we were falling behind China in terms of economic growth, but perhaps we are actually behind them in terms of economic slowdown. Some way or another they're always a step ahead of us.

... so if we precisely knew all China's economic statistics -- what the he|| would you do with that info ... of any significant importance?

I knew a student who was in college in the US, majoring in economics. Her parents owned an auto parts store in China, but a few years ago business became very bad and they closed it.

When I asked her about China's NIPA and other macro econ statistics, she exclaimed "It's all bullsh*t".

However, I don't know how much of that reflects her parents' micro econ experience, versus how much of it is based on an economist's critical look at China's NIPA figures.

I have not dug through the paper, but suspect it may be on to something. This was also going on in an earlier period. However, there was a period when the data distortion was going the other way, PRC was understating GDP and economic growth. This was from a bit before and awhile after PRC joined the WTO. The reason was to maintain official status as a "developing country," which exempted them from certain requirements and gave them certain advantages in trading rules within the WTO. But they gave that up some years later.

As for nominal versus PPP measures, the latter is real income and reflects actual material standard of living. Nominal international shows relative power in the world economy. These are not the same thing. Oh, and I think Tyler is fully aware of this. Anybody saying he does not understand PPP is just an idiotic ignoramus.

"Anybody saying he does not understand PPP is just an idiotic ignoramus."

Always good to hear from MR's #2 self-proclaimed genius. (Nobody tops self-proclaimed genius Ray Lopez)

So Japan's relative power in the world increased by 30% during the great recession - only to have that incredible power boost evaporate by 2015?


Rosser: "..., PRC was understating GDP and economic growth. This was from a bit before and awhile after PRC joined the WTO. The reason was to maintain official status as a "developing country," which exempted them from certain requirements and gave them certain advantages in trading rules within the WTO. But they gave that up some years later."

That didn't happen.

Here is an article written a few weeks ago that argues the stats are accurate:

"In 1998, as the Asian financial crisis hammered China’s neighbors, the impact of that conflict was plain to see. Data on everything from energy consumption to air travel showed growth flatlining. Professor Thomas Rawski, an expert on China’s economy at the University of Pittsburgh, estimated that China’s economy expanded by 2.2 percent or less that year, while the official reading was 7.8 percent."

This economist has also said that the Chinese government greatly inflated the growth rate when SARS was a pandemic from late 2002 to mid 2003.

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