Reasons to not believe the economic data that China publishes
Comment Duc Duy • 15:07, 10/30/21
China has always had two "different sets of books" about the country's economic situation. One set was created from fake data, to match the political line of the ruling Communist Party. This set of books is often publicized nationally and internationally. The other contains real data that can only be accessed by Party officials, or must be purchased on the black market.
That's according to Christopher Balding, who taught economics at Peking University's Business School in Shenzhen for nine years. In 2018, Mr. Balding was expelled from the school after expressing concerns about Beijing's censorship practices. After that, he left China under the pretext of protecting his own safety.
Balding, who now lives in the US, told EpochTV's "American Thought Leaders" program: While most people know about the top-down censorship system. To tighten the people's right to freedom of expression and access to information, few people realize the censorship within the Chinese Communist Party (CCP) bureaucracy itself."
“Besides, there is a great deal of censorship… in terms of how information is conveyed from bottom to top. No one is going to say to their leader, 'Report boss, we had a terrible year'.
According to Balding, “there are completely different sets of books” on economic data in China.
China's local authorities have even admitted so many times in recent years. In January 2017, the Liaoning provincial government admitted to exaggerating the province's economic data from 2011-14. A year later, a city in Inner Mongolia revised its 2017 economic data after redundancy. admitted that they had added “fake data”.
Mr. Balding told a story from when he was living in China. An official from the country told him that another official working at a local branch of the National Bureau of Statistics was arrested for selling real data on the economy.
Mr. Balding asked if the other person had been charged with corruption or crimes related to national security. The official who told him the story replied, "Oh, national security, we can't make that public."
"When someone confirmed there was real data and fake data, I was surprised," Balding said.
China's dual-data system has created a "thriving black market data market".
However, this game of data fraud is getting harder and harder to do. In particular, the Beijing regime has a hard time matching 'fake data' with 'actual numbers' that come from sources that are hard to fake, such as air quality and light intensity.
Mr Balding said: “Collating industrial activity figures in an area with air quality data can reveal truths. The economic data of a province with a large-scale steel production facility can be cross-checked by analyzing the air quality of that province.
If that province has good air quality, it is more likely that steel producers have burned less coal. Therefore, it is hard to believe that this region has achieved high economic growth.
A surveillance camera near the China Evergrande building in Shanghai on September 24, 2021. (Photo: Aly Song/Reuters)
Evergrande
While there is much speculation about whether or not Beijing rescues struggling property developer Evergrande, Mr. Balding believes the answer is quite simple.
The CCP “can totally solve this problem very easily” because Evergrande’s $300 billion debt is a fraction of the country’s gross domestic product (GDP).
What's important here, though, is how the real estate giant's crisis will spread to other sectors of the Chinese economy, such as retail and banking.
The real issue, according to Balding, is whether Beijing can work it out properly so that people don't lose faith in other areas of the Chinese economy, whether it's real estate, the aluminum industry, the cement industry. bamboo shoots, or banks.
On October 24, Evergrande announced that it has resumed construction activities in more than 10 real estate projects in 6 different cities in China. Even so, the company did not disclose the number of projects that have been suspended among its approximately 1,300 projects across the country.
Mr. Balding pointed to potential troubles at Ping An Bank, which has its headquarters in the southern Chinese city of Shenzhen.
According to Reuters, Ping An Bank's earnings report released on October 20 showed that the bank's special mention loans increased by 37.3% in the third quarter of 2021 compared to the third quarter of 2021. with the end of 2020. The cause is said to come from the liquidity difficulties of Shenzhen Baoneng Group, a real estate and financial services business.
Mr Balding added: “People have confidence in banks because they can go there and withdraw their money. If that trust is lost, even if the bank still has a good balance sheet, the bank will collapse because everyone wants to get all their money back.”
However, according to the economist, most of the trouble stemming from the Evergrande crisis will be confined to China.
“There's not a lot of money flowing from outside China into real estate and into Chinese aluminum companies. However, sectors or companies that are directly involved abroad will be greatly affected.”
These companies include foreign ore producers, as Chinese steelmakers will reduce their purchases of raw materials.
Empty apartment developments stand in the city of Ordos, Inner Mongolia on September 12, 2011. The city which is commonly referred to as a "Ghost Town" due to it's lack of people, is being built to house 1.5 million inhabitants and has been dubbed as the "Dubai of China" by locals. AFP PHOTO/Mark RALSTON (Photo credit should read MARK RALSTON/AFP via Getty Images)
Uninhabited real estate projects in Ordos city, Inner Mongolia, September 12, 2011. (Image: Mark Ralston/AFP via Getty Images)
China's Economy
According to Mr. Balding, Evergrande is not the only case in China where growth is based on debt and is being hit on his back by his stick. This is a problem all over China.
China is a “highly indebted country”, “Chinese households are more indebted than US households”.
“If you compare Chinese household debt with Russia or Mexico, compared to per capita income, Chinese households are more indebted than households in other countries,” notes. that most of this debt is tied to real estate, Mr. Balding said.
According to the South China Morning Post, household debt in China as a percentage of after-tax income hit a record high of 130.9% at the end of 2020, and stood at 61.3% of GDP in the first quarter of 2021.
"An economy can't run with the level of debt we're seeing," Balding said.
Such a high level of debt would put a “huge constraint” on future spending, reducing consumption of luxury goods, or international education services, among other things.
While many have argued that the Evergrande crisis and other trends are pushing China's economy into jeopardy, any assessment of the likelihood of a financial crisis in China, according to Mr. The country must also take into account its political system.
‘When will China face a financial crisis? - it's more of a "political question" than an "economic or financial question".
Authoritarian regimes like the CCP cannot allow such economic turmoil.
“If a financial crisis occurs in authoritarian countries… that will not bring good results for the leadership,” Mr. Balding said. Therefore, this is a matter of the "survival" of the communist regime. Chinese leader Xi Jinping will likely do whatever is necessary to resolve the crisis.
According to Mr. Balding, “There is no check that is too large that he does not sign. No bailout will be too big for him to come up with," because Xi "didn't want to lead China's downfall."
Trung Quốc luôn có 2 “bộ sổ sách khác nhau” về tình hình kinh tế đất nước. Một bộ được tạo ra từ dữ liệu giả, sao cho phù hợp với đường lối chính trị của Đảng Cộng sản cầm quyền. Bộ sổ sách ...
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