Posted on 12/19/2007 3:07:49 PM PST by nuconvert
The Chinese Economy Hoax and Other Economists' Fables
Michael Ledeen
A few years ago, when I was a member of something called “The U.S.-China Strategic Review Commission” (or so I remember it), we issued reports on China’s economy, military strategy, and political situation. In each of the first two such reports (I left the Commission before the third came out, and confess that I haven’t kept up with them) we took pains to state that the “official” data issued by the Chinese Government were totally unreliable. Indeed, we stated explicitly that the numbers were simply made up.
Now the World Bank has issued a dramatic reevaluation of the dimensions of the Chinese economy, and the Bank says that previous estimates overstated the facts by forty percent, which is a hefty number.
Take a look at this excellent editorial from Investor’s Business Daily, while spells it out very clearly, and draws some very important conclusions.
It seems the Bank may have found a reliable metric for measuring the real output of a society, and I wonder if they’ve done the same for countries like Iran and Syria and Saudi Arabia. I’m going to ask them, but you might look around as well. We need what my kids used to call “true facts,” not official numbers, which are sometimes produced on demand to satisfy one audience or another.
Back when I was reporting on Italy—we’re talking mid-seventies—my editor demanded that I get the “real numbers” on the Italian economy, since the “official” numbers showed that Italy was dead on arrival. I told him the Italian economy was fine, based on walking tours of various neighborhoods in Rome, Florence and Bologna. But he wanted numbers. So I visited a friend who was then Minister of Finance, and I explained my mission. He smiled happily and asked me “what numbers would your editor like?”
Ever since, I’ve been touched at the faith people show in official data…
Given the amount of insolvent debt to communist-run businesses and factories, China is worse off than people imagine. However this does not indicate taht China is not a threat. In fact, militant Han Chinese nationalism is about all that the ChiComs have these days, if the economy falters.
This article is ignorant. The World Bank revision has nothing to do with Chinese government statistics. The World Bank revision is in regards to purchasing power parity (PPP). Chinese statistics are recorded in yuan, and is then converted to dollars by the current exchange rate, not by PPP. Even with the revision, the World Bank estimate is still HIGHER than the Chinese government statistics.
People who don’t know crap about economics shouldn’t be writing economic analysis. The only people overestimating China’s economy is the World Bank (when using the PPP values), not the Chinese government nor anyone else in finance and international trade. The Chinese government doesn’t use PPP for their GDP conversions, they use the US dollar exchange rate.
Converting their fake numbers into US dollars is very useful.
I was an Econ minor, focusing in Macroeconomics, thank you.
Exchange rate conversions are better than the PPP way. The point is, blaming the World Bank’s own overestimations on the Chinese government is just stupid.
I wasn’t meaning to address you, but the original article. College minor doesn’t mean much though FYI.
ping
If his counterpart in China looked at how our BLS calculates employment and CPI numbers, he'd do exactly the same thing.
Why do you say that? Using official exchange rates would almost double the UK's GDP for example. A pound in the UK spends just about the same as a dollar in the U.S. Purchasing power parity brings the numbers back to reality.
When you’ve got 4 times as many people, you don’t have the same standard of living until you have an economy with 4 times as much product, and they are nowhere near that.
China’s Sov Fund is about to buy a chunk of Goldman...some hoax.
This blog entry that has been posted references an article with the real meat of the story.
I have gone ahead and posted it here.
http://www.freerepublic.com/focus/f-news/1942023/posts
Exchange rates attempt to reflect market value. China is a developing country, so it’s exchange rate is low, and its GDP when converted by exchange rates reflect that. Otherwise you potentially inflate China’s GDP and wealth (which is what the World Bank did). China is still a poor country, I think most Chinese are aware of this. It’s the Western Sinophiles who don’t.
All said, this could be a ruse to ease the pressure on China to revalue their currency among other things. Americans and other Free-Worlders can’t afford to put their guard down even for an instant.
Duncan Hunter shows the way!
Even if the World Bank over estimated China's wealth, that shouldn't take away all the accomplishments that has occurred in China. China moved up the rankings from about #8 in the world a decade ago to #3 today using the current exchange rates. And as you said in another post, the official exchange rate is likely under estimated.
It's ironic that China is both criticized for having an economy built on a house of cards while at the same time seen as a threat. The reality is, neither is true.
China trades her sweat and long hours for technology, which is an intangible. The West looses nothing and China gains know how to build a modern society for herself.
Despite the rhetoric on this board, your sentiments are right. China will do well, it's just a matter of time as she implements technology, both production of durable goods and information.
God Bless.
The World Bank wasn't using info provided by the Chinese government?
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