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Their GDP up only 10% this time, targeting for 8% this year.
Those who think China can't decouple might be in for a rude awakening.
Lester Thurow, the Nobel-Prize Winning economist has presented a convincing case that the Chinese are actually cooking the books on their economic growth. He's using the same methods as he did to assess the bogus growth numbers of the Soviet Union.
Why? Because while the Chinese keep throwing out double-digit gains in their GDP, their increase in power production is not growing half as fast. If you are really building new factors, increasing production, etc. etc. etc., this is physically impossible. While his calculations point to impressive gains along the same lines as Japan in the 1970s and 1980s in the 5-6% range, he concludes that there is simply no conceivable way they're hitting those numbers.
Several reasons for this. One, because China has zero transparency in its economic statistics, it is prime for cronyism. In fact, Thurow tried finding out the basis for a number of China's numbers and hit a brick wall in the process. Essentially, what you have is party bosses looking at the supposed five-year plan and then reporting gains that are in line with the five year plan.
The other thing to realize is that while Shanghai and other cities have grown spectacularly, there is wholesale unrest in other parts of the country where excruciating poverty is endemic. In fact, even the Chinese press reports that incidents of civil unrest are up 50% over the past year.
Finally, the Chinese stock market is down approximately 50% over its peak in October. You simply cannot have that kind of capital evaporate into thin air and not expect some serious consequences down the road.
In short, the Chinese economy is a house of cards, and is facing an enormous demographic crisis beginning in about 10-15 years, without the retirement pension systems that we have in the United States. If I had to bet on which economy will prosper over the long haul, it sure wouldn't be the Chinese.
Hey, don't take my word for it. I found the article for you:
ECONOMIC VIEW
A Chinese Century? Maybe It’s the Next One
By LESTER THUROW
Published: August 19, 2007
CHINA claims that its economy is growing at 10 to 11 percent a year, and China’s official analysts say that their nation will catch up with the United States long before the 22nd century arrives. Don’t believe it.
First, let’s deal with the implausibility of the official Chinese statistics. Mathematically, if the overall economy were to grow 10 percent annually, and the 70 percent of the economy that is based in rural areas were not growing (as stated by the Chinese government), the economy in China’s cities would have to be growing by 33 percent a year. The urban economy is growing rapidly, but not at a 33 percent pace.
Furthermore, Chinese statistics conflict with those of Hong Kong, the semiautonomous territory that serves as the financial capital of much of southern China. In 2001, Hong Kong had a recession, which is to say that it reported that its gross domestic product fell. Guangdong, the adjacent Chinese province, has a population of around 200 million. In 2001, it reported that its G.D.P. grew by 10 percent. What are the chances that both of those numbers are correct? Very slim.
Economic growth rates can be inferred from electricity consumption. In every country in the world, electricity use has generally grown faster than the G.D.P. Electricity is necessary for nearly all productive activities, and because of inefficiencies, consumption of electricity has generally outstripped economic growth. Rising energy costs have resulted in more efficient use of electricity, but especially in the developing world, economic growth has still generally lagged growth in electricity.
But if China’s official numbers are to be believed, there are provinces in China where the G.D.P. has been growing faster than energy use. That is unlikely, since the central government’s statistics also say that energy use per unit of G.D.P. is going up — not down, as claimed in provincial G.D.P. statistics.
Among the world’s 12 most rapidly growing economies over the last 10 years, the G.D.P. has grown only 45 percent as fast as electricity consumption. In the early 1970s, Japan was shutting down its electricity-guzzling aluminum industry. During this period, the G.D.P. grew 60 percent as fast as electricity consumption, the highest recorded level among industrialized nations.
Using those numbers as a guide, if we consider China’s actual electrical use, which is relatively easy to measure, and do a little math, we come up with this estimate: The G.D.P. in China has been growing somewhere between 4.5 percent (using the average for a rapidly growing country) to 6 percent a year (using the highest rate for Japan), not at the 10 percent rate claimed in official statistics.
The official statistic for China’s overall growth rate is best regarded as an approximate growth rate of the economy of its cities.
China also officially claims that it will catch up with the United States and become the world’s largest economy well before the 22nd century arrives.
There is an equally simple reason that neither of these predictions is likely to be realized. It simply takes more than 100 years for a large, less economically developed country to catch up with the world leader in per capita income. One need look only at the history of the United States, which had a much higher growth rate than Britain in the 19th century, yet did not catch up until World War I. Or consider Japan and the United States. Some 150 years after Japan started to modernize during the Meiji restoration, the country’s per capita G.D.P. is still only 80 percent of that of the United States in terms of purchasing power parity — although, in nominal terms, it has caught up.
The United States is not standing still. In fact, its per capita income grew faster than nearly all other big countries from 1990 to 2007. Europe’s per capita income fell from 85 percent of that of the United States in 1990 to 66 percent in 2007, according to International Monetary Fund statistics.
So let’s say that the inflation-adjusted growth rate for China is 4 percent a year. This is optimistic, because China will certainly have some bad years in the next century. Every country does — remember the Great Depression in the United States. A 4 percent rate is faster than any big country has ever grown for 100 years. But assume that China can do it. Assume, too, that America grows at the 3 percent rate it has averaged for the last 15 years.
Now project the two growth rates forward: the inflation-adjusted per-capita G.D.P. of China would be less than $40,000 in 2100, versus almost $650,000 in the United States. That’s because China starts at $1,000 per capita and the United States at $43,000. If, in 2100, China has four times as many people as the United States, as it does now, China would still not have a total G.D.P. equal to America’s.
But it is unlikely to have four times as many people. It is always a mistake to project population growth rates for a century, but let’s do it anyway: With a one-child policy and a sex ratio that favors boys (many men won’t find wives) — China should experience a decline in population in the 21st century. Yet let’s assume for a moment that China’s population remains constant, at 1.3 billion. If immigration to the United States continued at the current rate, America’s population would rise. If the population grew at 1 percent a year, as it has recently, it would more than double by 2100, reducing the enormous population gap between the two countries. Are these projections likely to be realized? Who knows?
What is clear is that China is unlikely to surpass the United States in G.D.P. in absolute or relative terms anytime soon.
There may be a Chinese century, but it will be the 22nd century — not the 21st.
Lester Thurow is a professor of management and economics at the Massachusetts Institute of Technology. He is also on the board of Taiwan Semiconductor, which does business in mainland China.
Take superstar investor Jim Rogers' word, or someone in an ivory tower?
Lemme think about that one...
Hmmmm....Nobel-Prize Winning Economist at MIT?
Board member of E-Trade?
Adviser to Presidents and corporations alike?
Or a guy who is making his money by flogging the Chinese stock market (Which, again, is down 50% for the past six months, and has no transparency and a cronyist relationship with Chinese government)?
I'm sticking with my guy.
The problem is that you have clouded judgment. You have a political agenda, wanting nothing more than some apocalyptic economic meltdown, when it's just not going to happen. What's more, cracks are already beginning to show in the Chinese system.
Carter got a nobel prize...so did Gore. 'Nuff said.
Quote:
Board member of E-Trade?
Jim Rogers spent years in China, had a Chinese daughter, lives in Singapore, and rode cross country in Asia buying up the country in spurts through the 80's and 90's. The guy pwns China.
Quote:
Adviser to Presidents and corporations alike?
Or a guy who was a good investor?
I'm sticking with my guy.
When someone is in a cabinet or advisor position, either government or private, it pays handsomely to take the exact opposite advice.
Last edited by ViewFromThePeak; 05-01-2008 at 02:09 PM..
Carter got a nobel prize...so did Gore. 'Nuff said.
Jim Rogers spent years in China, had a Chinese daughter, lives in Singapore, and rode cross country in Asia buying up the country in spurts through the 80's and 90's. The guy pwns China.
When someone is in a cabinet or advisor position, either government or private, it pays handsomely to take the exact opposite advice.
Actually, I've met the man. I've listened to his lectures. I've chatted about motorcycles with him. And I've even dinner at the same table as him. And, yes, he's an impressive investor. But calling the commodities market right in the 1990s is not the same thing as forecasting the macroeconomics of the world's largest economy.
The Nobel prize for Peace is in no way comparable to the Nobel Prize for economics, which has distinguished itself over the past 30 years for honoring free-market advocates. Surely you're not that big a goober to equate the two.
You said it yourself. The guy owns China, which means he has a vested interest in flog Chinese markets (Which, AGAIN, has lost HALF its value in the past half year). That's reason enough to look askance as opposed to uncritically swallowing everything the guy says.
Essentially, China is Japan, Part II. A closed society that's enjoying rapid growth at the moment, will begin running afoul of its own cronyism, and will eventually fall prey to its own unfavorable demographics.
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