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China’s economic numbers don’t add up

Marketplace Staff Sep 29, 2009


Kai Ryssdal: Downtown Beijing was buttoned up tight today. The government closed shops and restaurants and hotels near the Forbidden City and Tiananmen Square to clear the way for huge parades this Thursday. October 1st will mark 60 years since the founding of the People’s Republic. The Chinese economy has come quite a ways since 1949.

It’s growing faster than the U.S. is. And it’s a key player in the global recovery. The facts are right there in the data. Commentator Paul Kedrosky suggests China’s numbers bear a lot more scrutiny.

PAUL KEDROSKY: The Chinese economy is cheerfully mad. Consider some of these econo-nuggets: New brokerage accounts are soaring, with more brokerage accounts in China than there are members of the Communist Party. Chinese car sales passed the U.S. in the first half of 2009. Beijing alone sees 1,200 new cars a day on the roads. Lending is also doing an up-and-to-the-right hockey-stick — new lending by Chinese banks has tripled in the last year. And the country’s GDP is forecast to rise a whopping 9 percent in the current year, and 10 percent the year after.

Under the surface, however, things are even stranger. For example, despite the tripling in Chinese bank loans, government data shows non-performing loans declining. While that’s possible, I suppose, it would be highly unusual for more lending to be safer than less.

Similarly, despite a big uptick in manufacturing, usage of gasoline has declined almost 8 percent in the last year. The two indicators had moved together until December of last year, but now they don’t. How do you run an economy without gas? Cold fusion? And then there is how Chinese industrial activity has risen this year, but electrical usage in China has declined. How does that work?

China’s economic data and China’s economy are weirdly out of sync, a little like the way Bernie Madoff’s claimed trades never really matched up with the ticker. Now, I’m not saying that China’s economic resurgence is a fraud. It isn’t. Even if it has more to do with government spending than people spending.

So, what is going on here? My guess is that it has to do with the awfulness of Chinese economic statistics in general, but that’s just a guess. It could be that they’re made-up numbers, or that massive state intervention has created the first economy in history where growth and energy usage periodically decouple. No one knows for sure, but China’s is the most important economy in the world, so you would think more investors would care that its numbers don’t add up.

RYSSDAL: Paul Kedrosky is an economist in San Diego, Calif. His blog is called “Infectious Greed.”

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