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1/11
There is a very important point buried in this article. In June the OECD (like many others) calculated that China’s GDP would shrink sharply in 2020 – by 3.7% in their case. They are now projecting that it will grow by 1.7%. https://www.scmp.com/economy/global-economy/article/3101827/china-only-g20-country-expected-see-positive-economic-output?utm_source=Twitter&utm_medium=share_widget&utm_campaign=3101827
There is a very important point buried in this article. In June the OECD (like many others) calculated that China’s GDP would shrink sharply in 2020 – by 3.7% in their case. They are now projecting that it will grow by 1.7%. https://www.scmp.com/economy/global-economy/article/3101827/china-only-g20-country-expected-see-positive-economic-output?utm_source=Twitter&utm_medium=share_widget&utm_campaign=3101827
2/11
Even if this were their last upward revision, and I don’t think it is, this would normally be an astonishing (and terribly embarrassing) revision.
It’s not just them: most other China GDP growth projections from the IMF, the ADB and other public and private financial...
Even if this were their last upward revision, and I don’t think it is, this would normally be an astonishing (and terribly embarrassing) revision.
It’s not just them: most other China GDP growth projections from the IMF, the ADB and other public and private financial...
3/11
institutions were originally negative and now have also been revised sharply upwards to nearly 2% or 2-3%.
I, on the other hand, have been proposing since late April and May that China’s GDP growth this year would probably be 2-3% – but not because...
institutions were originally negative and now have also been revised sharply upwards to nearly 2% or 2-3%.
I, on the other hand, have been proposing since late April and May that China’s GDP growth this year would probably be 2-3% – but not because...
4/11
my economic model is better or more sophisticated than that of others. In fact I used no model at all. My assumption was simply that reported GDP in China is an input decided for political reasons (it must be high enough to keep unemployment at manageable levels), and not...
my economic model is better or more sophisticated than that of others. In fact I used no model at all. My assumption was simply that reported GDP in China is an input decided for political reasons (it must be high enough to keep unemployment at manageable levels), and not...
5/11
an output determined by the real state of the economy. Beijing, I assumed, would do whatever it required to get growth of 2-3%, which seemed to be the consensus on how much economic activity it needed, and it would allow debt to surge to whatever level was...
an output determined by the real state of the economy. Beijing, I assumed, would do whatever it required to get growth of 2-3%, which seemed to be the consensus on how much economic activity it needed, and it would allow debt to surge to whatever level was...
6/11
needed to get there. My prediction was no more sophisticated than that.
So are the various economic models that insisted that the impact of Covid-19 would be to shrink the Chinese economy meaningless?
needed to get there. My prediction was no more sophisticated than that.
So are the various economic models that insisted that the impact of Covid-19 would be to shrink the Chinese economy meaningless?
7/11
No at all. I would argue that they would have been right (if anything, overly optimistic) if China’s GDP were calculated in a way comparable to that of other OECD countries, but this would require at a minimum that non-productive investment should be written down in line...
No at all. I would argue that they would have been right (if anything, overly optimistic) if China’s GDP were calculated in a way comparable to that of other OECD countries, but this would require at a minimum that non-productive investment should be written down in line...
8/11
with those of other countries and so show up as losses in the value-added component of the GDP calculation.
But this isn’t how China calculates its GDP, which is why China choses its level of economic activity and can “raise” GDP growth to whatever level it deems...
with those of other countries and so show up as losses in the value-added component of the GDP calculation.
But this isn’t how China calculates its GDP, which is why China choses its level of economic activity and can “raise” GDP growth to whatever level it deems...
9/11
politically necessary. Notice that I am not repeating the claim made by many that China just fakes the numbers. Beijing isn’t faking the data, or at least not nearly as much as some think. It is just that China capitalizes a great deal of spending that should be – and in...
politically necessary. Notice that I am not repeating the claim made by many that China just fakes the numbers. Beijing isn’t faking the data, or at least not nearly as much as some think. It is just that China capitalizes a great deal of spending that should be – and in...
10/11
most other economies is – treated as expenses, and this boosts the accounting value both of the flow of wealth creation and the stock of wealth.
The key point here is that it is meaningless to compare China’s growth rate with that of the other G20 countries. They mean...
most other economies is – treated as expenses, and this boosts the accounting value both of the flow of wealth creation and the stock of wealth.
The key point here is that it is meaningless to compare China’s growth rate with that of the other G20 countries. They mean...
11/11
very different things. Obviously official organizations like the OECD and the IMF may have trouble pointing this out, but private research groups and the press should do a better job of explaining it. https://carnegieendowment.org/chinafinancialmarkets/82362
very different things. Obviously official organizations like the OECD and the IMF may have trouble pointing this out, but private research groups and the press should do a better job of explaining it. https://carnegieendowment.org/chinafinancialmarkets/82362
