Wall Street had to be doing wonders for Chinese wealth creation the last 20 years. Like who knew?
Chinese Economics Thread
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Wall Street had to be doing wonders for Chinese wealth creation the last 20 years. Like who knew?
Therein lies the tales of two systems.
Per Western doctrine of corporate governance, as famously described in corporate finance theory, it is the shares-holders, aka capital, that decide, or should ultimately decide what is a good economic activity to pursue for any corporations. Any corporate management that makes economic decisions that align with share-holders' interests is deemed to be under a good corporate governance, if not, under a bad one. Any corporation that takes share-holders out of the decision loop is deemed to be in breach of corporate governance. What is the share holders' interest one might ask, and it is the profit. So share holders, aka capital, wants only one thing, ie, the profit, and they got to have a say in every decision making in how to make that profit. In other words, everybody is accountable and answers to money, and it's called good governance. All the rage in the latest fads are green finance, social impact, impact investing, social entrepreneurship, etc, but they all the same in essence, same dance to the same song but with a different arrangement.
Current Chinese hybrid system mostly self finances its economic activities, these foreign investors/shareholders/capital don't have a say in what China does with her own money, and they don't like it a bit. That's the reason MSM business articles are abound with China collapse, with their own narrow corporate governance point of view. China has been building up her own financial capital, human capital and last but not least physical capital at an impressive clip that they feel they cannot maintain the lead by usual means of these finely couched, academically certified, MBA stamped BS doctrine of "for money, by money, nothing but money" governance. China would only allow foreign capital in much need technology and high end service sector in order to spur domestic competition and growth. Chinese system only allow capital as an engine, a horse, an ox, but not as a driver, or a decision marker. It's a means to an end. US$1 T worth China's tech shares wiped out in short succession don't mean much for Chinese system. It was only book value. Investors spooked? Never high up in the decision matrix. Like in the current pandemics precedent, it's the common Chinese people who's the ultimate goal that money must serve, not money itself. As China grows ever more, it's the foreign investors, if and when they bring in what China wants, who need China more. Not the other way around.
Western capitalist preaching finance to Chinese Communists is like a high school drop out teaching a seasoned Wall Street banker how money works.
I agree.
While China had a lot of growth these last couple of decades, but the US has had a very big headstart (it's moreover also an imperialistic power).
I would not be surprised if the various numbers for the US aren't accurate enough (in other words, lot is hidden/in reality owned by people from the US such as mercer/kocher family etc.).
EDIT: Also the fact there's many companies that are 'international'(set up by companies from X country in Y) and the likes.
Godfree Roberts ( a fellow commentator under a hitpiece in )
Michael Pettis has been writing this article for 13 years. It's always the same and it's always turned out to be wrong. He is not alone. There are many Western trolls who make a good living pouring scorn on China's achievements (and thereby hiding them from us until it is too late to do anything).
Writing about his latest book, CHINA’S ECONOMY, here's what economist Arthur K. Kroeber says: <blockquote>This book, like all works of practical economics, relies heavily on statistics. Most of the official Chinese government data are sourced from the CEIC database, which is the authorized online reseller for China’s National Bureau of Statistics (NBS). Some data not available from the CEIC is sourced from Chinese government publications, notably the yearbooks published by various agencies, the Ministry of Finance’s annual budget reports to the National People’s Congress, and occasional ad hoc reports that appear on government websites.
The unserious ones are those advanced by nonspecialists, typically analysts for hedge funds or other financial firms, alleging that Chinese data on GDP, or energy consumption, or inflation, or whatnot are falsified by the government in order to cover up some major problem. These claims, often hyped by the media, are best ignored. Economic data in all places are subject to various problems and distortions, which are addressed by the constant revision of published data and the underlying methods used by national statistical agencies, as well as by enormous volumes of academic econometric research that seek to refine our understanding of how numbers relate to reality. Many serious analysts do believe that the government tends to smooth out the quarterly GDP growth numbers, underreporting growth when it is very hot and nudging the figures upward when it is cool. Most other data problems and inconsistencies can be explained by ordinary analytic econometric work, without resort to conspiracy theories about deliberate falsification. Those interested in making sensible use of Chinese data should consult Tom Orlik’s excellent Understanding China’s Economic Indicators (FT Press, 2012).
The falsification theory also fails a simple logical test. If the government publishes false data, it must either rely on this false data to make economic policy, or it must keep a secret set of true data. If it uses false data, economic policy will quickly run aground, as it did during the Great Leap Forward of the 1950s, when reliance on bogus agricultural production numbers led within a couple of years to a catastrophic famine that killed tens of millions of people. This leaves the possibility that the government uses a secret set of true data to form policy, while feeding lies to the public. No evidence has ever been presented that such a secret data set exists. There are certainly a few data series that are not published but are reserved for the internal use of government officials. What is interesting is how boring these prove to be when occasionally they come to light through a leak—as, for instance, when a classified unemployment figure was accidentally disclosed at a press conference. The figure was 5 percent, compared to the published “registered unemployment” figure of 4 percent. In any case, if the government really kept a full set of secret accounts, the falsity of the published data could be exposed by the same statistical tests used by forensic accountants to prove chicanery in corporate balance sheets. These tests have been applied, and have failed to show any evidence of systemic falsification. … The more serious claim, made by several economists, is that China’s long-run growth rate has been systematically overstated, not because China sought to bamboozle the world but because its statisticians employed faulty techniques. The most recent version of this argument is by Harry X. Wu of The Conference Board, who heroically reconstructed China’s national accounts for the sixty-year period 1952–2012 in order to arrive at a better understanding of long-term trends in productivity growth. Wu concluded that, thanks mainly to weaker than reported productivity gains, China’s average annual real GDP growth during the reform era (1978–2012) was 7.2 percent, well below the official figure of 9.8 percent. This is an interesting exercise, but it raises some conceptual problems. If we assume that the size of the Chinese economy was accurately measured in 1978, then the lower growth rate compounded over thirty-four years implies that China’s economy in 2012 was less than half as big as the official data say it was. This is impossible, because the economy’s present size is roughly confirmed by a wealth of information, including the government’s own economic censuses, and indicators including exports, foreign exchange reserves and consumption of physical items such as automobiles, oil, steel, and cement that are independently verifiable and not subject to falsification. If, on the other hand, we assume that the economy’s reported size today is correct, then the lower growth rate compounded back thirty-four years implies that China’s economy was more than twice as big in 1978 as the government believed it to be. This is slightly more plausible than the first case, but not much. Alternatively, we can try to pick values for China’s 1978 and 2012 GDP that are not so obviously incredible, for instance that the economy was two-thirds bigger than reported in 1978 and one-quarter smaller in 2012 (in which case we need merely explain away $2 trillion—an India’s worth—of phantom output). Any way you slice it, it is quite hard to reconcile the arithmetic of these alternative growth calculations with observed reality. …
To anyone who has spent much time in China since the 1980s, it is clear that (a) China has grown very rapidly for a long time; and (b) the speed and nature of that growth was roughly comparable to that of Japan, South Korea, and Taiwan, each of which uncontroversially grew at 8 to 10 percent a year for about a quarter-century in the post–World War II era. The reluctance of some observers to accept that China achieved similar results to those of its neighbors, using essentially the same economic playbook, is odd. It probably reflects the belief that because China’s government is secretive, authoritarian, and untrustworthy in many political matters, its economic data must also be untrustworthy. The feeling is understandable, but the conclusion is supported by neither logic nor the preponderance of evidence. A government so dependent on sustained economic growth for its legitimacy, and so keenly aware (thanks to its own recent history) of the disastrous consequences of relying on bad data, has a strong self-interest in maintaining statistics that are approximately right, at least with regard to trends, even if they do not meet the highest standards of modern statistical science. Like all economic data, China’s must be used with care; but they are useable.
I didn't place this article here because it ticked my confirmation bias. I placed it here so that perennial cynics who doubt China's GDP figures and have a tough time trying to wait for the grand collapse to break open their pre prepared "Ha! i told you so ! " remarks be presented with some things that may be placed in the rear trunks of their minds and that I can't spare the time and effort to put into words.
(GodFree Roberts may be that disgruntled stubborn rare voter for the American/British Communist party. I don't care for the details of this dude.)
Michael Pettis has been writing this article for 13 years. It's always the same and it's always turned out to be wrong. He is not alone. There are many Western trolls who make a good living pouring scorn on China's achievements (and thereby hiding them from us until it is too late to do anything).
Writing about his latest book, CHINA’S ECONOMY, here's what economist Arthur K. Kroeber says: <blockquote>This book, like all works of practical economics, relies heavily on statistics. Most of the official Chinese government data are sourced from the CEIC database, which is the authorized online reseller for China’s National Bureau of Statistics (NBS). Some data not available from the CEIC is sourced from Chinese government publications, notably the yearbooks published by various agencies, the Ministry of Finance’s annual budget reports to the National People’s Congress, and occasional ad hoc reports that appear on government websites.
The unserious ones are those advanced by nonspecialists, typically analysts for hedge funds or other financial firms, alleging that Chinese data on GDP, or energy consumption, or inflation, or whatnot are falsified by the government in order to cover up some major problem. These claims, often hyped by the media, are best ignored. Economic data in all places are subject to various problems and distortions, which are addressed by the constant revision of published data and the underlying methods used by national statistical agencies, as well as by enormous volumes of academic econometric research that seek to refine our understanding of how numbers relate to reality. Many serious analysts do believe that the government tends to smooth out the quarterly GDP growth numbers, underreporting growth when it is very hot and nudging the figures upward when it is cool. Most other data problems and inconsistencies can be explained by ordinary analytic econometric work, without resort to conspiracy theories about deliberate falsification. Those interested in making sensible use of Chinese data should consult Tom Orlik’s excellent Understanding China’s Economic Indicators (FT Press, 2012).
The falsification theory also fails a simple logical test. If the government publishes false data, it must either rely on this false data to make economic policy, or it must keep a secret set of true data. If it uses false data, economic policy will quickly run aground, as it did during the Great Leap Forward of the 1950s, when reliance on bogus agricultural production numbers led within a couple of years to a catastrophic famine that killed tens of millions of people. This leaves the possibility that the government uses a secret set of true data to form policy, while feeding lies to the public. No evidence has ever been presented that such a secret data set exists. There are certainly a few data series that are not published but are reserved for the internal use of government officials. What is interesting is how boring these prove to be when occasionally they come to light through a leak—as, for instance, when a classified unemployment figure was accidentally disclosed at a press conference. The figure was 5 percent, compared to the published “registered unemployment” figure of 4 percent. In any case, if the government really kept a full set of secret accounts, the falsity of the published data could be exposed by the same statistical tests used by forensic accountants to prove chicanery in corporate balance sheets. These tests have been applied, and have failed to show any evidence of systemic falsification. … The more serious claim, made by several economists, is that China’s long-run growth rate has been systematically overstated, not because China sought to bamboozle the world but because its statisticians employed faulty techniques. The most recent version of this argument is by Harry X. Wu of The Conference Board, who heroically reconstructed China’s national accounts for the sixty-year period 1952–2012 in order to arrive at a better understanding of long-term trends in productivity growth. Wu concluded that, thanks mainly to weaker than reported productivity gains, China’s average annual real GDP growth during the reform era (1978–2012) was 7.2 percent, well below the official figure of 9.8 percent. This is an interesting exercise, but it raises some conceptual problems. If we assume that the size of the Chinese economy was accurately measured in 1978, then the lower growth rate compounded over thirty-four years implies that China’s economy in 2012 was less than half as big as the official data say it was. This is impossible, because the economy’s present size is roughly confirmed by a wealth of information, including the government’s own economic censuses, and indicators including exports, foreign exchange reserves and consumption of physical items such as automobiles, oil, steel, and cement that are independently verifiable and not subject to falsification. If, on the other hand, we assume that the economy’s reported size today is correct, then the lower growth rate compounded back thirty-four years implies that China’s economy was more than twice as big in 1978 as the government believed it to be. This is slightly more plausible than the first case, but not much. Alternatively, we can try to pick values for China’s 1978 and 2012 GDP that are not so obviously incredible, for instance that the economy was two-thirds bigger than reported in 1978 and one-quarter smaller in 2012 (in which case we need merely explain away $2 trillion—an India’s worth—of phantom output). Any way you slice it, it is quite hard to reconcile the arithmetic of these alternative growth calculations with observed reality. …
To anyone who has spent much time in China since the 1980s, it is clear that (a) China has grown very rapidly for a long time; and (b) the speed and nature of that growth was roughly comparable to that of Japan, South Korea, and Taiwan, each of which uncontroversially grew at 8 to 10 percent a year for about a quarter-century in the post–World War II era. The reluctance of some observers to accept that China achieved similar results to those of its neighbors, using essentially the same economic playbook, is odd. It probably reflects the belief that because China’s government is secretive, authoritarian, and untrustworthy in many political matters, its economic data must also be untrustworthy. The feeling is understandable, but the conclusion is supported by neither logic nor the preponderance of evidence. A government so dependent on sustained economic growth for its legitimacy, and so keenly aware (thanks to its own recent history) of the disastrous consequences of relying on bad data, has a strong self-interest in maintaining statistics that are approximately right, at least with regard to trends, even if they do not meet the highest standards of modern statistical science. Like all economic data, China’s must be used with care; but they are useable.
I didn't place this article here because it ticked my confirmation bias. I placed it here so that perennial cynics who doubt China's GDP figures and have a tough time trying to wait for the grand collapse to break open their pre prepared "Ha! i told you so ! " remarks be presented with some things that may be placed in the rear trunks of their minds and that I can't spare the time and effort to put into words.
(GodFree Roberts may be that disgruntled stubborn rare voter for the American/British Communist party. I don't care for the details of this dude.)
Electricity usage and cargo freight ships/trains frequency is a good on measuring the real economy.
I would also add how many top 1% patents in the world every country has.
Then how many of these patents are used in the real economy (instead of sitting unused in a desk somewhere).
Then there are basic import goods for the population such as coffee beans, tea, construction materials, agricultural imports, meat imports etc.
There are many ways to meausure the economy of a country. In all of those areas China has performed as it should according to its reported GDP data.
TLDR: fake news as usual. Would be more interesting to actual meausure with the above method, the US economy..
1. Some have attempted to use satellite images (nightime) to guage the electricity usage. And India came out being "shinier" that China. A lot of Jai Hinds celebrated. I was left wondering the whole point ( or pointlessness) of the exercise. What about Apartments and multi story residences ? How will satellites capture the luminescence of rooms in all levels of floors ?
2. China's informal economy as well as the service sector seem less accounted for still relative to US.
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Quickie
Colonel
Lighting is a very poor measure of electrical energy usage since it only makes up only a small portion of electricity usage. Consider that the average household electricity bill has less than 10% of the electricity usage coming from the household lightings.
Steel production requires a huge amount of electricity and I don't think satellite imagery would be able to measure any of it other than the lightings outside the factories.
Kind of wondering how it will measure light from high buildings China has a lot of apartment complexes that are like ten high.
It's not a direct comparison. The "logic" was that, more economic activity would mean more lighting ( both at homes and at stores/ offices). The North Korea/ South Korea night satellite shots may be an extreme case of this. But as you said, it is not at all a usable tool for any qualitative purposes. There is a scope for use but can only be found good for a PowerPoint presentation at Victims of Communism gettogether or NED think sessions.