China’s Economy, Still Strong

Discussion in 'China' started by huaxia rox, Jul 21, 2012.

  1. huaxia rox

    huaxia rox Senior Member Senior Member

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    http://www.nytimes.com/2012/07/12/opinion/chinas-optimistic-economy.html?_r=1

    THE “plum rain” that envelops Shanghai every summer — a confusing mix of drizzle, fog and smog — is a handy metaphor for the murkiness that currently enshrouds China’s economy.

    A drumbeat of negative views about China’s economic prospects dominates the country’s image. The financial weekly Barron’s recently proclaimed in a cover story that “it looks like the Great China Growth Story may be falling apart.” On Friday, China is expected to announce new, subpar growth figures.

    But consider a less prominent fact: a Bloomberg survey of economic forecasters yielded an average projected growth rate for China of 8.2 percent for 2012. If that’s the oft-predicted “hard landing” from the heights of China’s historic double-digit rates, let’s all wish for a similar fate for the United States. No other major country — not even Brazil or India — will grow at a rate near China’s this year.

    As a China believer who recently made a return trip to the country after eight months, I was eager to assess whether the optimism evident there during my past visits had ebbed. I met with businesspeople and investors, mostly Chinese. To be sure, almost every meeting included an acknowledgment of relative soft spots in the economy and worries about things like declining exports, weakening Western economies, a housing bubble, too much investment and a failure to spur domestic consumption.

    But on balance, the people I met were firmly optimistic that the fundamental “urge to surge” remained. If anything, the intervening decline in the Chinese stock market had made them more enthusiastic about investing.

    “China wants you to misunderstand this economy,” one very successful investor said, suggesting that it serves China’s interests to be underestimated by the United States.

    Concerns about China’s economy are often exacerbated by anxieties about its political stability amid a leadership transition, rampant corruption and official economic data of questionable veracity. But put those emotions and knee-jerk skepticism aside, and the economic picture looks rosy, at least to me.

    Take, for example, China’s extraordinary investment rate of 48 percent of gross domestic product. High investment is a hallmark of an emerging economy; China’s capital stock per capita is still only about a tenth of the United States’, which suggests room for further investment.

    All that spending gives China a feeling of lunging further and further into the 21st century. Visiting Pudong, Shanghai’s shiny new financial district, I recalled that when it was built, in the late 1990s, the vast project was ridiculed by critics as unlikely to ever be fully utilized. Today, Pudong is a major money center.

    No doubt a portion of China’s investment has been misdirected. But misdirected overinvestment won’t bring down an economy; it simply represents lost consumption for Chinese families. In any event, I’d prefer some misdirected investment to the United States’ alternative: a modest 16 percent investment rate.

    As for concerns about the housing market, here’s what passes for a burst bubble in China: a 2.2 percent decline in housing prices over nine months (and then a small increase in June). Compare that with the 33 percent drop in the United States between July 2006 and January 2012.

    And what of the economic downturn in the West? Though it has indisputably hurt Chinese exports (which are still growing, albeit at a rapidly decelerating rate), China is now far less dependent on its exports; their share of G.D.P. has dropped from almost 40 percent in 2007 to 29 percent.

    China may be totalitarian, but its leaders still behave as if they had 1.3 billion customers whom they need to keep happy by delivering steady and rapid progress up the economic ladder. Interest rates were cut in June and were just lowered again. Constraints on bank lending have been relaxed. The luxury tax was reduced. And notably, the managed appreciation of China’s currency over the past two years or so has been slightly reversed as China continues to pursue its neomercantilist strategy of manipulating everything from technology transfers to trade barriers.

    While China has instituted only modest measures to stimulate consumer spending, the investors I met with are buying up businesses ranging from car dealerships to dairies, betting that the Chinese will step up their expenditures.

    The “pessimists-lite” — those who argue that China’s growth rate may not re-accelerate — may be right. No economy can expand indefinitely at China’s historic double-digit rate. But for me, China’s economy still pulsates with the confidence of its growing entrepreneurial spirit, an important factor that doesn’t fit neatly into statistical models.
     
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  3. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Apparently not if CCP has to hide a bunch of bankrupt companies trying to defraud foreign investors.

    Beijing cuts access to US-listed firms' corporate data

    US research firms have found it increasingly difficult to obtain information of US-listed Chinese firms as these companies and the Chinese government have reportedly harassed researchers or limited their access to information.

    Short sellers in the United States have made a fortune from making reports exposing dodgy financial statements and poor corporate governance of Chinese companies listed in the US stock. Over the last couple of months, however, Chinese companies have become more aggressive toward investigators and Beijing has also launched a campaign across 20 provinces to forbid investigators from obtaining information from individuals. More than 1,900 people have been detained under the campaign as of April 28, according to the Wall Street Journal.

    Short seller Muddy Waters Research published a report that suggested Chinese private educational service New Oriental Education and Technology Group did not own a network of schools as it claimed, causing the company's share price to drop by half. It rebounded after New Oriental published an announcement to rebut the report, which was based on a conversation between Muddy Waters and the Chinese firm's potential franchise.

    The Chinese company also faces investigation by the US Securities and Exchange Commission regarding its financial statement, since it included profits earned by its variable interest entity. China's accounting system allows foreign investors to run a business in China through an offshore holding company so the entity could seriously affect the value of the company if New Oriental did not have full control over it, Wall Street Journal said.

    Chinese government officials also reportedly interfered with the investigation of foreign companies. During Muddy Waters Research's investigation into New Oriental, the company's staff were visited by officials from China's Ministry of State Security who implied that they "do not want any work done researching companies, especially public companies," according to the research firm's founder Carson Block.

    Investigations into Chinese companies have even become dangerous. In the second half of last year, an employee of investment fund GeoInvesting was attacked and had his ID taken as he inquired into the number of trucks going in and out of a Chinese factory, according to Dan David, the fund's vice president.

    Lawyers, investors and research firms said that even before Beijing clamped down on corporate investigation, they were already unable to obtain corporate records from the State Administration of Industry and Commerce. The Beijing branch of the government agency said some unscrupulous lawyers had exploited public information by selling it.

    Beijing cuts access to US-listed firms' corporate data|Companies|Business|WantChinaTimes.com
     
  4. huaxia rox

    huaxia rox Senior Member Senior Member

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  5. Ray

    Ray The Chairman Defence Professionals Moderator

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    China's economy by no stretch of imagination is strong.

    It is merely holding and slipping.

    Let us not delude ourselves!
     
  6. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    I see GoI revising numbers... does CCP?
     
  7. huaxia rox

    huaxia rox Senior Member Senior Member

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  8. Ray

    Ray The Chairman Defence Professionals Moderator

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    From the various reports in the media and threads on this forum of fudging statistics, could I take it that it is not revising but devising?
     
  9. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    China never revises GDP down... only up. :rolleyes:
     
  10. huaxia rox

    huaxia rox Senior Member Senior Member

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    if the figure of GDP growth is caculatted smaller than it really is prc will revise GDP data up there after and also with the growth of economy the poverty line will therefor be logically raised which is exactly whats happenning in prc...
     

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