Latest Statistics about China's economic growth
When I was a graduate business student, I learned well about the concept of lying with statistics. In short, the most effective liars are those who can deceive with the truth. This definitively applies to the latest statistical figures of the Chinese economy. As the latest numbers project, the Chinese economy is still growing quickly at about an 11% annual pace, and foreign direct investments are still increasing. Though factually accurate, statisticians only measure the official (government-regulated) part of the Chinese economy and neglect unofficial commerce, investments and consumptions that provide for at least half of the real economical activities within China. For example, all (nearly 100%) of Chinese government officials (from the Minister to Governors, Mayors, Departmental-directors, supervisors and clerks as well as employees of State and private enterprises depend heavily on un-regulated income (bribes, extortions and kick-backs) to maintain their livihood. How else can people who earn officially less than US$2,500 annually pay for their lavish lifestyle (multiple apartments, luxury cars, Rolex watches, jewelries, nightly meals at super-posh restaurants and mistresses)? Though the Chinese Communist Party can invest more into the official economy and creates the deception of unstoppable economic growth by fudging with contractual and real investments, the word on the street is that hard times are coming down fast.
Already, the majority of China's citizens (over 700 millions in the rural regions and 500 millions migrant workers living below subsistence level in squatter sites along the coastal regions) have to do without enough food and clean water. This can potentially create huge social instabilities and political turmoil across China.
Though the 250 million+ permanent residence/inhabitants (with Hu-Kou) in primary and leading secondary cities (from Beijing, Shanghai, Shenzhen and Guangzhou to Chong-Qing, Dalian and Wuxi) are doing better, they are also facing enormous inflationary pressure brought on by a hyper-inflated real estate and stock market. Undoubtedly, they too will feel the impact of a slowing global economy with raising inflation where their living and production-input-cost goes up and their production value goes down. What we will see in Chinaover the next 5 years is
1. a rapid devaluation of Chinese assets/wealth (from their current unrealistic and unsustainable level), which will result in negative consumption in the official economy stemming from 250 million+ city dwellers living in primary and leading secondary cities. This will impact directly economic growth in China.
2. foreign direct investments will slow to a stop as the RMB shoots up to compensate for raising input costs. This will dramatically reduce China's competitiveness and will force its enterprises to compete through product/service differentiation and higher value-adding capabilities.
3. governmental orchestrated initiatives to spur consumption and to attract investments, technologies and know-how to help transform the Chinese economy to a more productive, high-value-adding, environmentally-sustainable and quality/safety conscious place.
4. faster adoption of market-driven principles with oversights, comparable to those practiced in the US, Japan, Australia and Europe.
The biggest challenge for the CCPC is time. Will it be able to transform the Chinese economy with all of its pressing problems (hyper-inflation in core products, slowing-growth in exports/consumption, environmental/ecological-disaster, accelerating discontent of citizens and desperation of the great mass of unemployed ...) before the people get feed-up with its unabating corruption and complete-ineptitude and overthrow this regime. History gives us a clear course of action, but will the tyrants that run China today heed the call of humility and change course now?
More analysis to come soon!
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