huzihaidao12
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China's missing trillions
Economists have known for years that China's official economic data was full of inconsistencies, but new data shows that the gap between what is real and what is reported could be very wide indeed. And the good news is that the structural imbalance thought to exist in China's economy between exports and domestic consumption, might not be as severe as we thought.
Last week JPMorgan’s chief Asian and emerging market strategist Jonathan Garner visited Hong Kong to launch the group’s Asian/global emerging markets equity strategy, entitled 2010 Outlook: Headwinds Building But Further Upside Likely. In the report, Morgan Stanley suggests that China’s 2008 GDP figures could out by $US1.25 trillion – but not in the direction most economists would suppose.
China's official GDP estimate was around $US4.4 trillion for 2008 GDP, but Morgan Stanley’s estimate is more like $US5.7 trillion – an astonishing 30 per cent higher. Garner also suggests that total per capita spending of $US1,221, is actually, more like $2,183 (79 per cent higher).
Garner’s premise for this theory stems primarily from the idea that GDP is extremely difficult to calculate, especially in an economy as big as China’s.
“It [GDP] is subject to a lot of statistical inference and estimation and particularly in emerging markets, where private sector services activities of all forms, be it offering a haircut service or a car or offering, let’s say, English language tuition, all of these things that might be going in China at the moment – you have to have the statistical agency to capture it,” he said at the conference. He is essentially suggesting leakage of some spending on service-related industries.
He also points to the auto and white-goods booms of 2009. “If the stated incomes in China are correct, the official incomes, you shouldn’t have had China becoming the world’s largest auto market last year. That degree of auto sales shouldn’t have occurred, so the only conclusion must be that the incomes are understated,” he said.
The good news is that if Garner is right and his figures are closer to the real picture of what’s going on in China then the structural imbalance in the economy, between exports and domestic demand, is not as severe as market-watchers may have thought.
But the reasons for the inaccuracies might not just be as simple as GDP being hard to calculate. In a recent interview with Business Spectator, David O’Rear, chief economist of the Hong Kong General Chamber of Commerce, said that China's GDP figures have a twenty per cent margin of error. He suggests the problem is caused not only by the data being difficult to manage, but also because of political manipulation in certain areas.
China, politically, is very target-oriented. There are targets for just about everything, from production to efficiency, wind power to waste water. Not meeting those targets can be very embarrassing indeed when you’re in a developed economy like Australia or the US with scathingly critical media and looming elections.
But it is inconceivable that Chinese Premier Wen Jiabao would endure the sort of public criticism that would occur if a western leader failed to meet his or her economic targets. But that’s a bit of a non-issue, because as it happens, the targets always seem to get met.
High-profile China commentator Gordon Chang has also suggested political pressure is in part to blame for the China's skewed statistics, saying that China's government believes the maintenance of the appearance of a vibrant economy is necessary to act as a self-fulfilling prophecy.
Calling on China to increase domestic consumption based on figures that may be incorrect, as the US has done, is not the most constructive way to approach this issue. While some of the political hurdles might be more problematic, developed economies would do better to bring pressure to bear on China – through research, trade, government and diplomatic channels – to improve the statistical infrastructure in place to gather this data, and indeed offering any support or expertise that may benefit its development and improve our true picture of what's really going on in China.
http://www.businessspectator.com.au...markets-pd20100215-2P8WC?OpenDocument&src=sph
Whether there is enough wisdom to meet the requirements of the parties, the key lies in China's strength. The United States is a strength of the supremacy of the State, and now continue with the policy of the past, just because your strength is not enough. So.
Economists have known for years that China's official economic data was full of inconsistencies, but new data shows that the gap between what is real and what is reported could be very wide indeed. And the good news is that the structural imbalance thought to exist in China's economy between exports and domestic consumption, might not be as severe as we thought.
Last week JPMorgan’s chief Asian and emerging market strategist Jonathan Garner visited Hong Kong to launch the group’s Asian/global emerging markets equity strategy, entitled 2010 Outlook: Headwinds Building But Further Upside Likely. In the report, Morgan Stanley suggests that China’s 2008 GDP figures could out by $US1.25 trillion – but not in the direction most economists would suppose.
China's official GDP estimate was around $US4.4 trillion for 2008 GDP, but Morgan Stanley’s estimate is more like $US5.7 trillion – an astonishing 30 per cent higher. Garner also suggests that total per capita spending of $US1,221, is actually, more like $2,183 (79 per cent higher).
Garner’s premise for this theory stems primarily from the idea that GDP is extremely difficult to calculate, especially in an economy as big as China’s.
“It [GDP] is subject to a lot of statistical inference and estimation and particularly in emerging markets, where private sector services activities of all forms, be it offering a haircut service or a car or offering, let’s say, English language tuition, all of these things that might be going in China at the moment – you have to have the statistical agency to capture it,” he said at the conference. He is essentially suggesting leakage of some spending on service-related industries.
He also points to the auto and white-goods booms of 2009. “If the stated incomes in China are correct, the official incomes, you shouldn’t have had China becoming the world’s largest auto market last year. That degree of auto sales shouldn’t have occurred, so the only conclusion must be that the incomes are understated,” he said.
The good news is that if Garner is right and his figures are closer to the real picture of what’s going on in China then the structural imbalance in the economy, between exports and domestic demand, is not as severe as market-watchers may have thought.
But the reasons for the inaccuracies might not just be as simple as GDP being hard to calculate. In a recent interview with Business Spectator, David O’Rear, chief economist of the Hong Kong General Chamber of Commerce, said that China's GDP figures have a twenty per cent margin of error. He suggests the problem is caused not only by the data being difficult to manage, but also because of political manipulation in certain areas.
China, politically, is very target-oriented. There are targets for just about everything, from production to efficiency, wind power to waste water. Not meeting those targets can be very embarrassing indeed when you’re in a developed economy like Australia or the US with scathingly critical media and looming elections.
But it is inconceivable that Chinese Premier Wen Jiabao would endure the sort of public criticism that would occur if a western leader failed to meet his or her economic targets. But that’s a bit of a non-issue, because as it happens, the targets always seem to get met.
High-profile China commentator Gordon Chang has also suggested political pressure is in part to blame for the China's skewed statistics, saying that China's government believes the maintenance of the appearance of a vibrant economy is necessary to act as a self-fulfilling prophecy.
Calling on China to increase domestic consumption based on figures that may be incorrect, as the US has done, is not the most constructive way to approach this issue. While some of the political hurdles might be more problematic, developed economies would do better to bring pressure to bear on China – through research, trade, government and diplomatic channels – to improve the statistical infrastructure in place to gather this data, and indeed offering any support or expertise that may benefit its development and improve our true picture of what's really going on in China.
http://www.businessspectator.com.au...markets-pd20100215-2P8WC?OpenDocument&src=sph
Whether there is enough wisdom to meet the requirements of the parties, the key lies in China's strength. The United States is a strength of the supremacy of the State, and now continue with the policy of the past, just because your strength is not enough. So.
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In paper futrue plan?
