
The perils of reporting on China's GDP - clouddrover
http://www.bbc.com/news/business-38686570
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ecommerceguy
As someone who's frequently been to China, and I'm talking remote,
countryside, ox sowed rice paddy China, everything published from the
government is known locally as being totally fake. Bribes are standard and
should be expected to do any transaction of volume. Fake GDP numbers are
obvious. Heck, fake everything is the norm there. Tax day is very interesting.
Uniformed government officials setup camp at the major "5 star" hotels in town
and the factory bosses show up in their Lexus SUVs with duffle bags full of
Yuan to pay the toll. It's something to be seen for sure. There is no real
accounting in middle China. I attribute all the fakeness to 3 main factors;
communist party politics, local politics and the diversity of cultures
equating to local protectionism and face saving. It's entrenched and will
likely never change.

I could probably write a book about fake China.

~~~
jonwachob91
You could start with a blog... (video, audio, or written)

If you get yuge <\----> (those are hands far apart...) number of viewers you
could get a massive book deal.

~~~
robertelder
I have been watching this guy's videos, and there are a lot of interesting
details about what life is really like in China:

[https://www.youtube.com/watch?v=1At2H-lIJog](https://www.youtube.com/watch?v=1At2H-lIJog)

~~~
ethbro
Having hiked a bit of the Great Wall during a layover in November of last
year, China even an hour outside the Beijing airport is a bizarre amalgamation
of technology (concrete everywhere, solar, modern roads) and much much older
techniques (pre-mechanized farming, no centralized utilities, stores with
shelves whose stock looks like it's the US Great Depression).

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).

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rrggrr
Anyone interested in China's real economic condition should have a look at the
ongoing analysis by Michael Pettis:

[http://carnegieendowment.org/experts/444](http://carnegieendowment.org/experts/444)

And Christopher Balding:

[http://www.baldingsworld.com/](http://www.baldingsworld.com/)

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.

~~~
conistonwater
One thing I never totally understood is: what happens if those things don't
get done? For example, when there is a trillion in non-performing loans, is it
an absolute inevitability that they will be written off, or is it "merely" a
good idea to write them off (and hence one would think they would write them
off)?

~~~
adventured
The Japan zombie scenario is usually cited as the most likely outcome if China
refuses to reform its economy and allow bad loans to go bad (allow bankruptcy
etc).

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.

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vtange
China has done a really great job marketing their economy to the average
American though. From the quick numbers to the glistening photos of Shanghai.

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.

~~~
Zigurd
Some of the obvious achievements in China can't be faked. Shanghai, Beijing,
ShenZhen and other first-tier cities are very impressive, not just in
pictures. These are not Potemkin villages. The impressiveness is evident edge
to edge, all over town.

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.

~~~
baybal2
Yes, that's true. Shenzhen real estate prices are closing on that of
Manhattan's when you talk about urban centres. It is also the most expensive
city to live in in China (again, true only for urban centres. Suburbs are
still livable).

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"

~~~
seanmcdirmid
Shenzhen real estate value is approaching Tokyo's of the late 80s...I won't
spoil how that ended.

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".

~~~
kurthr
Yes, even SanFran/SiliValley prices do not surprise Chinese visitors to the
US. They're only shocked you get an entire house for that price, and that the
houses are so old!

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ChuckMcM
I've always found the competing interests in Chinese economic data to be
fascinating. But what is more interesting is that the reality, apparently
somewhere between what the government says and the completely dystopian view
of Chinese detractors has brought a tremendous number of people out of real
poverty. A friend of mine who started a business there remarked in 2004 that
there was so much money around it was impossible for the party members to
shovel it all to their lieutenants and the overflow was helping the growing
middle class.

"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.

~~~
seanmcdirmid
A lot of that indfrastructure isn't going to last. We talk about bridges that
fail that we're built 50 years ago, in china its more like 10, or even a brand
new one fails because all work was sub contracted out multiple times.

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.

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jayjay71
"Now, for the first time, we have official confirmation that GDP (in China)
has been fabricated."

How much have the numbers been changed?

~~~
jonwachob91
The last paragraph estimates 4% instead of 7%. But they don't cite sources to
back the claim up.

~~~
ktRolster
4% growth is still pretty good tbh

~~~
DeonPenny
Not for china, the government unlike most western country only stays in power
because of the growing economy. I the west if the economy is broken it's the
people fault. There it's the communist fault the economy broke.

~~~
seanmcdirmid
Which makes unwinding very hard. So they keep pumping up the bubble and
kicking the can down as long as possible...they have no other choice unless
they can eventually blame an external entity (Trump might be a godsend for the
CPC).

~~~
DeonPenny
I have a feeling if your starving at home you're not going to care if the
government is blaming someone half a world away.

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rajeshp1986
I am not quite sure how GDP of a country is measured and what are the
different methods to measure GDP. But one thing we can't deny is that
everything that we use today has "Manufactured in China" label to it. I am
just amazed how many goods are produced in China.

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.

~~~
Fifer82
If I want to help my Country, I need to go out, get blasted on ale, and then
take out a credit card on the way home, preferably a loan. This would be the
only thing that I could do to improve my countries economy and apparently, our
Economy is in good shape (just ignore health, social care, pensions, energy,
transport, education, ai and the aging demographic and viola).

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.

------
woodandsteel
People who support authoritarianism claim it can run the economy more
efficiently than democracy. But one of the problems in authoritarian regimes
is you almost invariably get massive faking of economic data, and so the
government lacks the understanding needed to make sound decisions.

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maverick_iceman
I'm seeing all these anti-China articles constantly for the last two years.
There's a whole army of 'experts' claiming that China's economy will crash any
day now. However, none of that has happened.

~~~
rrggrr
Experts have not and do not predict a imminent crash as a likely scenario.
Possible, yes. Likely, no. They have predicted costly and painful
unemployment, wealth destruction, and increased civil unrest... all mostly
avoidable if swift action is taken to rebalance China's economy. The
inaccuracies are your's.

~~~
seanmcdirmid
Crashes have happened multiple times over the last 20 years, the recent being
the Chinese stock market crash a year ago. It would be stupid not to predict a
crash, as they are pretty common. Collapse is much worse, and isn't being
predicted by the western media. If you google news "china economic collapse"
you'll find Chinese media talking about how the west media is predicting this,
but oddly enough, no western mainstream media actually predicting that (beyond
Gordon Chang, no one at all).

