My second concern regarding global economic stability; China’s false economic numbers

The CPC and its false economy: Why would I believe anything that comes from a regime that killed 100 million to consolidate its grip on power?
  • Although circumspection is warranted with the Federal government’s economic data, this confidence gap pales in comparison to the reliability of China’s published numbers.
  • Even if China’s productivity grows 1.5 times faster than in comparable countries, its yearly trend growth should be about 3.5%, not >6.0%.
  • Communist party members and sympathizers receive preferential treatment. Only the well-connected can thrive in China. All decade, I have strongly warned my readers to avoid all passive Chinese and yuan-denominated assets. It turned out to be excellent advice.
  • Considering that the Communist Party of China (CPC) has been responsible for killing up to 100 million of its own Chinese citizens over the past 100 years to consolidate its grip on power, why would I believe anything coming from their news outlets? I never do and you shouldn’t either.
  • The CPC is growing its nation’s economy with a mix of brutal centralized control and Western monetary policy. Since China is new to the fiat money game, it could be the one to topple the system. The Western nations seem to have their circumstances under control.
  • The world’s investors know the CPCs true colors, but they won’t say anything adverse as that may undermine investment opportunities.

…I argue that, based on the performance of countries comparable to China, the latter’s GDP growth could be as low as half the official number and that markets are likely overestimating China’s importance for the global economy. That being said, China has one of the highest levels of corporate debt in the world and slower growth implies greater risks of financial instability.

China’s true economic growth could be half of what everyone thinks; Business Insider, Dominique Dwor-Frecaut, November 29th

How can China’s economy grow at more than 6% when its share of global exports has flatlined and the global economy is only growing at about 2%?

I pass along a link to a timely Business Insider article regarding the fabricated economic growth data that the CPC-controlled government publishes.  It’s an interesting read and one with which I agree. I have always rejected the notion that China’s economy could continue to grow at over 6% annually with falling export growth and a population rising by only 0.5% a year.

Here is another observation. If China’s economy was growing as well as the CPC says, then the yuan should be performing better against the US dollar.

The yuan struggles against the USD. This chart shows me that China’s official GDP growth data of >6% is a fraud. The yuan’s structural weakness is just another reason for Americans to avoid yuan-denominated assets.

I base my skepticism over Chinese growth on three things primarily.

  • First, China’s government driven development model works well in the early stages of development but much less well when economies become more complex and growth becomes dependent on private sector innovations – the stage China is currently at. For instance, China’s property rights system, with its fluid delimitation of public and private spheres, is an impediment to the country’s integration into the global economic system.
  • Second, studies of the middle income trap show that countries tend to get stuck at lower levels of income per capita when they have very high investment ratios because these tend to reflect pervasive distortions. China’s investment share of GDP was 45% in 2018, much higher than the 25% prevailing in comparable countries.
  • Third, China’s share of global manufactured exports has been falling or stagnant since 2015 and the country is struggling to rebuild it. This is inconsistent with superior productivity growth. China’s loss of global market share suggests productivity has failed to keep up with wage growth.

China’s true economic growth could be half of what everyone thinks; Business Insider, Dominique Dwor-Frecaut, November 29th

If you are still bullish on a centrally-planned economy in which its ruling party publishes bogus information, then disregard this article. I am old enough to recall the Soviet and CPC propaganda campaigns from the 70’s and 80s. The same power structures are still in place today, but have only re-branded themselves to be more appealing to the unwashed masses who have forgotten or are unaware of these governments’ murdering atrocities.

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