Money

An obvious farce

China has stopped
pretending to tell us
about its economy

China has stopped pretending to tell us about its economy

It’s a miracle!

China’s economy — a striving, seething mass of a billion consumers, entrepreneurs, workers, and investors — has expanded at the exact same rate for the last three quarters in a row: 6.7 percent. Coincidentally, that also happens to be the rate of growth that Communist Party officials have projected for the year.

Everyone knows this is a farce. For example, the global markets hardly budged on the release of this update on the world’s second-largest economy, which suggests investors don’t put much stock in it. Serious investors and the researchers that serve them have their own gauges of the Chinese economy. Research firm Capital Economics, for one, says its own proxy of Chinese growth shows the Asian nation’s economy expanding at about 5 percent a year.

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So is there any takeaway from China’s recent update? Well, yeah, in a sense. China is showing that they’re willing to do whatever it takes to maintain the appearance of the strong economic growth that has justified the Communist Party’s hold on power in recent decades.

Other updates on the economy also released Wednesday tell the same story. Chinese banks — directed by the government — made a ton of new loans, helping to keep the property market strong. And the state-owned companies have taken the lead by making big investments, shoring up another important leg of the Chinese economy.

In the short term, that can keep growth up. But most economists say the growth strategy China has used over the last 20 years — heavy industry and infrastructure investment aimed at boosting exports — is getting pretty stale. The next phase will require some pretty radical reforms that China’s leadership doesn’t seem eager to face, like shaking up the state-owned companies that dominate large chunks of the economy and dealing with a growing real estate bubble.

 

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