Why obsessing over GDP is no longer in China’s best interests

[tranquilium]

Growth is unbalanced and the raw GDP growth number fails to indicate any improvement in general standard of living. A green GDP combined with Gini index may be an improvement.

Eh, gini index is good for small nations with relatively even demographic distribution or little variation on living cost. For large countries like China or US, the geographic difference in different part of the country alone is enough to throw off GINI index. IMO, analyzing large economies are (rightfully so) very complicated jobs that require hundreds of indicators at minimum.

 

[BuddhaPalm]

Eh, gini index is good for small nations with relatively even demographic distribution or little variation on living cost. For large countries like China or US, the geographic difference in different part of the country alone is enough to throw off GINI index. IMO, analyzing large economies are (rightfully so) very complicated jobs that require hundreds of indicators at minimum.

I get your point. My overall remark is that China is past the point where GDP is a meaningful indicator of raw power to lift masses from poverty. It is as meaningful as total manufacturing output, for example. China's growth is so unbalanced that the pressing issues are rule of law, income equality and resolving social problems. The environmental pollution and phenomenon of people getting away with murder as long as it is done behind car wheels are two examples.

 

[tranquilium]

I get your point. My overall remark is that China is past the point where GDP is a meaningful indicator of raw power to lift masses from poverty. It is as meaningful as total manufacturing output, for example. China's growth is so unbalanced that the pressing issues are rule of law, income equality and resolving social problems. The environmental pollution and phenomenon of people getting away with murder as long as it is done behind car wheels are two examples.

Maybe it is because I am an engineer, but tbh, I think there are more important issues. Don't get me wrong, raising living standard is very important, but I don't consider lifting people out of poverty and income equality to be the same issue. The former is a necessity because you need an educated work force for farther development and people in poverty doesn't tend to get a good education.
Income disparity, on the other hand, is a much more complex issue. While too much disparity is certainly bad for the society, it is also unrealisitc to expect everyone to make the same amount of money. Even for the same position, the lazy and the hardworking should have a difference. There is also the problem of people's personal expectation vs what is actual best for the nation.
Of course, the other part of the income disparity is region development disparity, but such development takes time and also, let's be honest, the average joe on the street cares more about how much money he is making than how the country is investing in regional development. (which is one of the reason you should let a professional doing his job rather than rely on your personal feelings)
As for the most pressing issue, I am a firm believer that improvement in the overall productive forces is the most important driving force of social advancement. In this sense, my take on the most important issue for China will be technological innovation, infrastructure improvement, space exploration, etc.

 

[BuddhaPalm]

Maybe it is because I am an engineer, but tbh, I think there are more important issues. Don't get me wrong, raising living standard is very important, but I don't consider lifting people out of poverty and income equality to be the same issue. The former is a necessity because you need an educated work force for farther development and people in poverty doesn't tend to get a good education.
Income disparity, on the other hand, is a much more complex issue. While too much disparity is certainly bad for the society, it is also unrealisitc to expect everyone to make the same amount of money. Even for the same position, the lazy and the hardworking should have a difference. There is also the problem of people's personal expectation vs what is actual best for the nation.
Of course, the other part of the income disparity is region development disparity, but such development takes time and also, let's be honest, the average joe on the street cares more about how much money he is making than how the country is investing in regional development. (which is one of the reason you should let a professional doing his job rather than rely on your personal feelings)
As for the most pressing issue, I am a firm believer that improvement in the overall productive forces is the most important driving force of social advancement. In this sense, my take on the most important issue for China will be technological innovation, infrastructure improvement, space exploration, etc.

I think you are focusing on textbook theories rather than real life. The environmental problems I am referring to is not an abstract trade off between production and environmental protection but rather pollution caused by individuals or groups in society due to lack of community control or oversight. You are imagining that these social scientific textbooks play out in real life in China. They do not play out in any major respect. China is still at a stage of development where lack of community control is at the root of all internal problems. Total GDP is not a meaningful index of standard of living because it totally disregards the impact of failure of community controls or oversight. Do you see Xi Jinping referring to GDP when justifying a corruption crackdown?

 

[tranquilium]

I think you are focusing on textbook theories rather than real life. The environmental problems I am referring to is not an abstract trade off between production and environmental protection but rather pollution caused by individuals or groups in society due to lack of community control or oversight. You are imagining that these social scientific textbooks play out in real life in China. They do not play out in any major respect. China is still at a stage of development where lack of community control is at the root of all internal problems. Total GDP is not a meaningful index of standard of living because it totally disregards the impact of failure of community controls or oversight. Do you see Xi Jinping referring to GDP when justifying a corruption crackdown?

Erm, my stance from the very beginning is that GDP alone is not a good indicator and no, this is not from social scientific textbook. My research is on renewable energy and by extension, environment impact. It is through the research, as well as meeting people in the industry and work on renewable project that I realize the current environmental improvement measure are merely stopgaps meaning to stall. Fixing the problem can only come from better technology. True, management is important, but it is not the thing that will fundamentally improve the situation. Hence why technological progression and infrastructure development (which helps technology progression and implementation. It also covers things like education, which helps on improvement community management) are the most important issue for me.

Of course, different people are from different background and they have different needs as well, so their priority can very well be different.

 

[BuddhaPalm]

Erm, my stance from the very beginning is that GDP alone is not a good indicator and no, this is not from social scientific textbook. My research is on renewable energy and by extension, environment impact. It is through the research, as well as meeting people in the industry and work on renewable project that I realize the current environmental improvement measure are merely stopgaps meaning to stall. Fixing the problem can only come from better technology. True, management is important, but it is not the thing that will fundamentally improve the situation. Hence why technological progression and infrastructure development (which helps technology progression and implementation. It also covers things like education, which helps on improvement community management) are the most important issue for me.

Of course, different people are from different background and they have different needs as well, so their priority can very well be different.

The issue raised by the title is whether GDP is a misleading index for Chinese economic and development policy at this point in time and the answer is "yes." I believe you are focusing on technological development without asking the question whether or not the most common social ills are the kind that technological development can cure. What use is a revolutionary new green technology when people don't even recycle and municipalities do not even know how to dispose waste properly? China is not even at a level of development where it needs shiny new toys to deliver environmental miracles but rather it is at a very low basic level where nothing gets done and things fall into disorder. Environmental matter is just one dimension, social law and order is another gaping hole as I mentioned before.

 

[TaiShang]

China is not even at a level of development where it needs shiny new toys to deliver environmental miracles but rather it is at a very low basic level where nothing gets done and things fall into disorder. Environmental matter is just one dimension, social law and order is another gaping hole as I mentioned before.

You have definitely a very bleak outlook as if no improvement has been done on any front over the three-four years when China began to transition to New Normal of economic development. Things won't improve as fast as you hope them to be -- this is against the laws of social evolution.

Perhaps it is time to nuke all those disorderly things into oblivion, now that you have been one of the most trigger happy defense enthusiast here.

 

[Lil Mathew]

GDP calculation is a summation of the cash flow, itself is a temporary figure. Investment, particularly long investment, is judged by its overall effect rather than its cash return. For example, highway system is the artery of a nation's economic activity, but if you only look at it from current year GDP, highway system is actual a sink and incurs much debt. This is why it is BS to say infrastructure investment are bad just because it doesn't return immediately. Are the cargo flow and flourishing business going to be counted as cash gain from highways? Of course not. Are the highways bad investments then? Of course not.

Currently, the problem with much of the developing world is that a lot of these countries are simply too small, too unstable, too short-sighted to establish a long-term plan and build long lasting infrastructure that let them truly prosper. Of course "economists" in developed nation would like you take GDP and short-term return as the important indicator, that means less of your money and resource are going into advancing the nation and you will not be a threat to them. This is also why they like to harp on "total debt" of China. The central government debt is important because it hampers the central government's ability to make large scale, long term investment. (In this sector, government is the typically the main driving force in any country). Corporate debt, on the other hand, is a matter of government's ability to reign in private capital. It is different country by country. The infrastructure debt in the article is plain ridiculous, because it is simply long term investment.

Too much hushh hushh, so much analysis just on one ratio ... Can you please compare China's debt with China's investments and capital assets ... You are assuming without any basis that investments are bad investments and will not give appropriate return ... that's bull shit ... If you take all of the China's debt kindly do take all of China's asset as well ...

Furthermore, a nation's total debt is an arbitrary figure ... there is no confirm source of it as the data is not reliable ...

Making highways & bridges are not become a liability if there is a demand for that..

For example ..
Planning for a bridge---> demand for products---> more production--->more jobs+ demand for raw materials (more inflation) ----> more GDP

But here that is not the case.. Here just reverse is happening.. I will explain..
Need more GDP & need more jobs to pacify the public( for the stability of party rule) ---> More industries---> Overcapacity---->more production ( but no such demand)---> creating demand by pumping debt to public ---> more infrastructure+ more houses( inflation by money over supply)..
For example real estate bubble in China.. More money for public make unnatural price for the property.. That is people ready to pay 1000 yuan for a 100yuan property.. One day this bubble will burst & yuan will fall freely..
Communist party of China well aware of this, that is why Xi introduce "Supply Side Structural Reform"..
Since November 2015, the Chinese government has been implementing supply-side structural reforms.. But they can't perform that without losing GDP growth.. So they are postponing reforms & continue pumping money.. Remember Japan in 1990.. Stock market & real estate bubbles broke & country fell to economic stagnation.. China is doing same mistake..

 

[TaiShang]

Need more GDP & need more jobs to pacify the public( for the stability of party rule)

Your starting premise is wrong and emotional.

Which government would not want job creation and why it has to be only to pacify the public? Besides, everybody likes middle class that is more or less stable and content with life. This has nothing to do with political system.

Is India poor and has terrible infrastructure because the government does not need to pacify the public?

So, India has so many unemployed young and old illiterate people because Indian government wants non-pacified and over-active citizens? Maybe we can now understand why many foreign tourists, especially women, find Indian jobless and/or badly employed men to be "over-active?"

GDP and growth is needed and desired to grow and become stronger. A stronger country is good and desired. Especially if a country is starting from a very low levels of national development like (once) war-ravaged country, China, of course, the government will want GDP growth at all cost.

Check out the growth rates of Taiwan province, Korea, Japan, and Singapore in the 60s, 70s, and early 80s. They also grew an average 9%-10% points. So, they also wanted to pacify their people?

As for infrastructure, China still has several trillion USD to go until it reaches a developed country level of infrastructure.

Perhaps Indian infrastructure is terrible and logistics is sub-Saharan levels only because the government is inefficient.

Perhaps China's infrastructure is one of the best and fastest developing because the government is more efficient?

 

[Shotgunner51]

public and private debt of 260 per cent of GDP by the end of last year, the highest debt-to-GDP ratio in the world.

What a load of bull crap from populist journalism, what debts?

Firstly, on domestic credit/debt market, the term is Domestic Credit to Private Sector, as % GDP, US 188.8%, China 153.3%, what's the "world highest" BS?
http://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS?year_high_desc=true

And within domestic credit/debt market, if people troll sector by sector, troll Chinese corporate sector, why not troll US household sector? Forget where 2008 started?

Secondly, on national debt, as % GDP, US 104.17% (one-third owned by foreign creditors), China 43.9% (almost entirely owned by domestic creditors), what's the "world highest" BS?
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
http://www.tradingeconomics.com/china/government-debt-to-gdp

Last but not least, on overall external position (external assets less external liabilities), even a kid with basic literacy knows US is now net debtor, Net International Investment Position -$7.7811 trillion, lowest in the world, while China on the opposite is net creditor, among highest in the world, what's the point of even a comparison between two extremes?
Top 10 creditor nations by 2016 Q2:

https://bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm
https://defence.pk/threads/whos-worlds-4th-largest-creditor-nation.455610/
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[艹艹艹]

Is the Chinese economy going to collapse again?

 

[The Accountant]

Making highways & bridges are not become a liability if there is a demand for that..

For example ..
Planning for a bridge---> demand for products---> more production--->more jobs+ demand for raw materials (more inflation) ----> more GDP

But here that is not the case.. Here just reverse is happening.. I will explain..
Need more GDP & need more jobs to pacify the public( for the stability of party rule) ---> More industries---> Overcapacity---->more production ( but no such demand)---> creating demand by pumping debt to public ---> more infrastructure+ more houses( inflation by money over supply)..
For example real estate bubble in China.. More money for public make unnatural price for the property.. That is people ready to pay 1000 yuan for a 100yuan property.. One day this bubble will burst & yuan will fall freely..
Communist party of China well aware of this, that is why Xi introduce "Supply Side Structural Reform"..
Since November 2015, the Chinese government has been implementing supply-side structural reforms.. But they can't perform that without losing GDP growth.. So they are postponing reforms & continue pumping money.. Remember Japan in 1990.. Stock market & real estate bubbles broke & country fell to economic stagnation.. China is doing same mistake..

Brother I can bet you I have studied more economics and have studied more financials then you ... you are talking about inflation then for your kind information the whole world is in a bubble ... India, Pakistan and USA is the biggest bubble .. China's bubble is still much controlled I can assure you that ...

But the point you are making from that prospective whole world's financial system is at a werge of collapse ... just go and study USA bond buying program Japan's negative interest rate ... China is way too better than USA and Japan ...

 

[Deidara]

One cant really advise the communist party on the internet as it is a very through institute. That would be like showing lamp to the sun. But i am of the opinion that now China is at a stage where primary focus should be the quality of life of its citizens, individually and collectively. Not productivity or other such indicators. Even though these indicators are related to the quality of life in an untidy manner.

 

[GeraltofRivia]

Realising the challenge of taming asset bubbles, solving rising bad debt and checking unbalanced growth

On China's debt:
Chinese economy has a large debt book, so does US. China's debt to GDP ratio is in line with US and most importantly, China’s debt is largely locally funded and is backed by a hugh hoard of domestic deposit, standing at 200% of GDP. US has a much lower deposit at 90% of GDP.

On asset bubble:
Talking about bubble, China's share market is at historically low level while others are at all time high.

On manufacture oriented economy:
Manufacture oriented economy is a great economy. I suppose China's goal is becoming one of the most advanced manufacturing nations in the world.

On consumption driven economy: similar to worker, a nation can only consume as much as he earns. if a worker consumes more than he earns, he has to borrow, so does a nation.

On GDP target and market force:
The author says that China should let market force a decision role. China has shown one can have a perfectly running market economy with significant state presence. To a large extent, China's economic policy follow Keynesian economic theory, which works just fine. if some countries like to implement the liberalism economic model, so be it.

 

[TaiShang]

On GDP target and market force:
The author says that China should let market force a decision role. China has shown one can have a perfectly running market economy with significant state presence. To a large extent, China's economic policy follow Keynesian economic theory, which works just fine. if some countries like to implement the liberalism economic model, so be it.

China's model also resembles developmental state in which the state makes long term industrial planning through 5 year plans.