China's Economic Rebound 'Not Real'

[GoFlyKiteNow]

China's Economic Rebound 'Not Real' . - says John Talbott
By Angela Harper
AAP Sep 9, 2009

BRISBANE—Australia's hopes of relying on China to ride out the global economic downturn may rest on a mirage of inflated growth figures, says a global finance expert.

John R Talbott is a former investment banker-turned-author whose books predicted the dot.com and housing market crashes.

The author of The 86 Biggest Lies on Wall Street is a guest at the Brisbane Writers Festival.

Talbott has given Australia top marks for keeping its head above water during the global financial crisis but has reservations about its reliance on China and stimulus packages.

The signs of recovery being seen around the world are due to huge stimulus packages, which will only prop up economies for another 12 to 18 months before they collapse again, he says.

Crippling debt, high unemployment and the retirement of baby boomers means people's ability to spend will diminish.

"Stimulus (packages) around the world are a mistake, because if government could create jobs we wouldn't need private enterprise," he said.

"I mean, if all you had to do was go and spend a trillion dollars as a government we'd never have recessions, depressions, and the greatest socialist countries in the world would be the richest, but just the opposite is true.

"What they're really doing is applying trillion-dollar bandaids."

Talbott thinks China may have cooked its books about the scale of its recovery.

"The strength of the Australian economy now is directly related to China," he said.

"The question is whether the Chinese growth is even accurately reported—which I don't think it is—and whether it's real—and it's not real.

"It's being generated by a huge half-trillion-dollar stimulus plan of which 95 per cent went to their state-owned enterprises.

"These are worst people on earth you want spending your money."

Where Australia's geographic position was once an impediment, it is now an asset in surmounting the financial crisis thanks to the rise of China and India, the author said.

"You did all the right things and you did them well, and now the world's come your way," he said of the government's handling of the crisis," he said.

"You are the geographic outpost of the biggest economic explosion in history—1.4 billion Chinese and one billion Indians have decided to be capitalists, and you're sitting here with the rule book on how to play capitalism.

"You're beautifully positioned."

 

[GoFlyKiteNow]

“Who Made the 1.4 Trillion-Yuan Mistake?”

After the Gross Domestic Product (GDP) reports for the first half of 2009 from various local areas in China were published, the sum was found to exceed China’s national GDP statistic by 1.4 trillion yuan (approximately U.S.$205 billion).

Some economists commented that China’s GDP figure could only be used as a “reference.”

In mid-July, the Chinese National Bureau of Statistics announced China’s GDP for the first half of 2009 to be 13.98 trillion yuan (approximately US$2.045 trillion). Meanwhile, the Hong Kong Apple Daily reported the sum of the GDP figures for the first half of the year from 31 provinces and autonomous regions reached 15.38 trillion yuan (approximately U.S.$2.25 trillion). This 1.4 trillion yuan difference is a 10 per cent inflation of the national data.

The Apple Daily’s editorial article entitled, “Who Made the 1.4 Trillion-Yuan Mistake?” commented that the Chinese central government-ordered mandate to “ensure economic growth” under the economic crisis has led to adulteration of the data in local areas to ensure their performance will look good.

The report summarized the main causes of the problem: the over-emphasis of the GDP growth rate in the assessment and the lack of an effective monitoring mechanism. Therefore, the central government is responsible for the false data.

Hu Xingdou, economist and professor at the Beijing Institute of Technology, indicated in an interview with Voice of America that local officials are very likely to produce false and concealed data to achieve so-called “performance.”

He said, “There is no penalty for reporting false information under the current system. The policy of pursuing GDP growth at all costs is bound to encourage local officials at all levels to produce false GDP figures.”

Zhong Dajun, the founder of the Beijing Dajun Economic Observer Center said, “It is clear that the GDP alone does not correspond to the well-being of China’s economy.

Investment in useless construction might pull up the GDP figure, but does not improve the livelihood of the public. In this case, no one cares about the GDP.”

The Apple Daily editorial also commented that the central government’s fear that the real data might upset the stock market and thus, social stability has also caused officials to turn a blind eye to the false data put out by the local areas.

Zhong agreed to this theory, “because stock stability does rely on the GDP.”

However, he added, “The number is only a reference for the economist.” He suggested that the Chinese as well as the international community not over emphasize the GDP figure.

Zhong Dajun said, “Economists don’t judge the economy merely based on numbers. The Chinese economists are getting used to this (false data). No one will take it seriously as something concrete. It’s only a reference.”
Last Updated
Aug 7, 2009

 

[longbow]

Firstly, aren't you amazed that all this commentary is going on in China with no censorship? This is a good sign.

Secondly, there is no doubt that there will be differences between what is reported from provinces and what is available from Central Gov.

I doubt if the Central G can really hide much given the widespread open commentary we can see from your report.

The difference in GDP numbers of $200B is peanuts. Take a look at this - China dumped in US$600 to US$800B of stimulus injected into the economy within the last 12 months (US has yet to dole out 1/3 of its stimulus because of bureaucracy), if you factor in multiplier effect that is easily 3 to 4 times that number. So we are talking about $2 Trillion in economy effect. On top of that they are talking about difference between provincial and Federal numbers. If you add US State GSP numbers it will not add up to Fed GDP numbers.

As it is even in the US the economic figures are not accurate hence the report that they may or may not be out of recession - Bernanke.

Also remember that China's GDP is US$4.4 Trillion (2008). $200B in view of the stimulus is acceptable.

 

[scoobyhoo]

ya-lah, all the smokes from china are not real. big buildings are not real. cars are not real. china is as poor as a mouse in the church.

 

[GoFlyKiteNow]

Firstly, aren't you amazed that all this commentary is going on in China with no censorship? This is a good sign.

Yes, it is a remarkable state of affairs in China, for such debates to go on openly. Considering that other communist regimes like N Korea and Cuba are million miles behind China in this regard.

But one must also keep in mind that: There is a limit to this openness. Which is, not to challenge the authority and position of the Party, - which will definitely not allow or tolerate any alternate political opinion or party to emerge. At that point, the openness and tolerance will vanish and be replaced with an iron ruthless fist.
A tradition of all communist parties.

 

[longbow]

Goflykite - read this article and learn why economic numbers can be off.

Reasons given for wrong and late GDP report:

•Final estimate is released two years on, after four revisions.
•Primary data sources capture only 25% of GDP.
•For households and unorganised sector, where data collection is unfeasible, indirect estimates are made.•State data comes very late. The last available is still for 2007-08.
What’s being done to correct it?



http://business.outlookindia.com/article.aspx?261211


Economic Data
The Numbers Are Misleading
Important economic decisions are sta ked on these four numbers. Yet, they can’t be taken at face value.
John Samuel Raja D
PRINT SHARE COMMENTS




Index of Industrial Production (IIP)

What is it?

Released monthly, the IIP captures changes in industrial output—25% of the economy—on a year-on-year (y-o-y) basis. The IIP for, say, May was 2.7%. This means the value of goods produced by India’s factories in May 2009 increased by 2.7% over May 2008. Also, gives industry-wise break-up.

What’s wrong with it?

•The list of 543 goods hasn’t changed since 1993-94, but Indian manufacturing has—hugely.
•Many factories are defunct, while many new, functional ones remain excluded.
•Low initial response rate causes divergence between initial and final estimates.
What’s being done to correct it?

•A new series (base year of 2004-05) is likely from calendar 2010, with about 900 products.
•DIPP supplies 75% of all data. Now, economic think-tank CMIE will collect data on DIPP’s behalf. This is likely to improve data accuracy.
Gross Domestic Product (GDP)

What is it?

The value of all goods produced and services rendered in India in a particular period. Declared quarterly, GDP growth shows the y-o-y change. Data can be desegregated by industry and usage.

What’s wrong with it?

•Final estimate is released two years on, after four revisions.
•Primary data sources capture only 25% of GDP.
•For households and unorganised sector, where data collection is unfeasible, indirect estimates are made.
•State data comes very late. The last available is still for 2007-08.
What’s being done to correct it?

•Starting calendar 2010, base year to be upgraded from 1999-2000 to 2004-05.
•Survey of unorganised sectors could be incorporated to estimate output from this segment more accurately.
•Tap the corporate data filing with the Ministry of Corporate Affairs to double primary coverage in the GDP to 50%.
Wholesale Price Index (WPI)

What is it?

Every week, this commonly tracked inflation index measures y-o-y change in wholesale prices of 435 products.

What’s wrong with it?

•Base year for WPI is 1993-94.
•No uniformity among collection agencies on a ‘wholesale transaction’.
•Initial estimate is based on just 20-25% responses. It’s 70-75% for the final estimate, released two weeks later. This leads to divergence between the initial and final estimates.
•Services (55% of GDP) is excluded.
What’s being done to correct it?

•A new WPI series (base year of 2004-05, 1,224 items) is in the works.
•To improve rural data collection, the Ministry of Statistics has tied up with the postal department.
•The Ministry is considering a separate inflation measure for the services sector. Start with financial services and transport-related services, and gradually cover all segments.
Below Poverty Line (BPL) Families

What is it?

A measure of households living below the poverty line computed by the Planning Commission. These are the intended beneficiaries of poverty alleviation schemes. The poverty line is set at 2,400 kilo calories per person, per day, in rural areas and 2,100 kcal in urban areas. Or, Rs 356 and Rs 539.

What’s wrong with it?

•Many say the Commission’s figure of 27.5% is an understatement, others say it is an overstatement.
•The Commission draws the line and the Rural Development Ministry identifies the BPL families using its own methodology. Often, the Ministry’s BPL estimates exceed the Commission’s.
•Very often, the poor are excluded and the non-poor are included.
What’s being done to correct it?

The Ministry has the NC Saxena Committee report on how to streamline the BPL census. The Planning Commission has appointed a panel to define criteria for identifying BPL families.

 

[longbow]

You are talking about the ploitical system or the economy. If you understand the meaning of communism how can you even think that economy in China is communistic/socialism? What about the booming shanghai stock exchange?

How can you even compare Cuba and North Korea to China? Ask the hundred of millions of poor if they like their current system which has improved their standards of living and many would say yes. Do ask citizens in its "democratic neighbor where there is no real reduction in poverty if they like their system - promblem is many are too poor and illiterate to even know.

Political system China is communist. But I do not see much difference from the democratic systems in Philippines and India where they claim democracy and year in year out you have the same old leaders and yet no improvement in voter's lives. In a true democracy, 2 terms of bad economy and they get voted out. In philippines it is same old Marcos, Aquino family day in and out. In India it is same old Gandhi and Congress party. How can there be a real democracy if the poor have no voice. yes they have a vote but can not do anything to change their plight.

The sad thing is citizen keep living in filth and slums, with little education and praise democracy.

They should wake up and see their leaders raping the land (read somewhere that rich Indians have close to 1 trillion stashed in Swiss accounts). What is Mittal doing? He is living in London and investing all his money outside of India. The avg citizen should ask themselves why still no improvement. No point wallow in hopelessnes and keep putting their faith in their religion (very religious country). Do something about it. And as much as they harp about democracy the detestable caste system is as undemocratic as it comes.

How can you be truly democratic when yet have the caste system? In fact India should have turn communist. That would demolish the caste system and help improve the lives of the chronic poor. Also would build some infra.

Also pointless to spend all you time scouting out negative China articles, often from dubious or at least not mainstream sources. China is not perfect but the living conditions have improved for the majority. It has become an economy power (why do you see the tension between US and China).

If you look at your posts, 70% are negative articles on China from non mainstream sources. Instead why not post positive articles about India. That would be a nice change.

Have you been to Shanghai lately. have you been to Mumbai or delhi lately? I have and I tell you, there is no comparison. Sad because there is so much potential in India but the corruption is very very bad and nothing gets built.

Yes, it is a remarkable state of affairs in China, for such debates to go on openly. Considering that other communist regimes like N Korea and Cuba are million miles behind China in this regard.

But one must also keep in mind that: There is a limit to this openness. Which is, not to challenge the authority and position of the Party, - which will definitely not allow or tolerate any alternate political opinion or party to emerge. At that point, the openness and tolerance will vanish and be replaced with an iron ruthless fist.
A tradition of all communist parties.

 

[GoFlyKiteNow]

I was not comparing China vs N Korea and Cuba in economic terms.

About openness itself. The openness found in China is far ahead of these two communist nations who have same political system as China.

The economy of any nation can be badly affected by political changes or disquiet. That is the fundamental fact. Latent but inherent.

The all powerful link between the economy and political state of a country. Because "instability" is right next door. Especially if the country does not have or allow pluralism in its political arena. Such as China.

Hence, if there are serious disquiet or upheaval in the government, it will quickly produce catastrophic effects on the country. Economically and socially. Example: The former Soviet Union and the fall of the party due to Glasnost ( openess ) introduced by Gorbachev.

On the other hand, in pluralistic system, changes are smooth and does not carry much spill over effects on the economy. Thus it can absorb and tolerate a lot of openness.

Example: The recent change in Japan when LDP lost power.
Or Italy, where it has changed government 16 times in 16 years in the not too distant past. The USA, French, India government changes.
And so do many other nations.

The political transitions have been smooth, orderly and did not affect the economy of these nations.

But with communist party run nations, ..such stability is always in peril.

 

[longbow]

No true at all. Democracy itself does not create stability. Look at Thailand.

What creates stability is a strong economy. USSR collapse not because of communism. It collapse because of failed economy which was caused in part by a failed socialistic economic model. The formula is strong economy - creation of strong middle class - democracy.

In all nations that have democracy without strong middle class or strong economy is just a democracy in name.

And to have a strong economy, capitalism works. Chinese economy is as capitalistic as it gets, often much more so than US system.

You can compare the most vibrant capitalistic economy in the world - China vs the largest democracy in the world India.

I think you will find that Chinese citizens are doing a whole lot better. Case in point, here is excerpts from Mar 2009 Bloomberg article (I will post article in entirety below).

"India has the greatest proportion of people in Asia behind Nepal without access to improved sanitation, according to Unicef. Some 665 million Indians practice open defecation, more than half the global total. In China, the world’s most populous country, 37 million people defecate in the open, according to Unicef. "

 

[longbow]

Remember that China has a population 40% larger than India. Also it suffered 30 years under socialism and the disasterous great leap forward under Mao.

What was most telling was this sentence:

"Dodging leering men and stick-wielding farmers and avoiding spots that her neighbors had soiled, the mother of three pulled up her sari and defecated with the Taj Mahal in plain view. "

That is India, the super rich that live in palaces (read about 1 guy building a $1B home for his family - even Bill gates does not live in a $1B home and there is nothing to be proud of that) and the grovelling poor with no way out despite years of inequality. If you point out the inequality they will tell you - we are the largest democracy in the world. Screw that bogus democracy if 600m of your people shit in the open like animals.

Remember that with people 600M people crapping in the fields and take into account hot humid climate and frequent floods. Boy that is a cess pool of diseases.

Again this is a mainstream article - Bloomberg

http://www.bloomberg.com/apps/news?sid=aErNiP_V4RLc&pid=20601109

March 4 (Bloomberg) -- Until May 2007, Meera Devi rose before dawn each day and walked a half mile to a vegetable patch outside the village of Kachpura to find a secluded place.

Dodging leering men and stick-wielding farmers and avoiding spots that her neighbors had soiled, the mother of three pulled up her sari and defecated with the Taj Mahal in plain view.

With that act, she added to the estimated 100,000 tons of human excrement that Indians leave each day in fields of potatoes, carrots and spinach, on banks that line rivers used for drinking and bathing and along roads jammed with scooters, trucks and pedestrians. Devi looks back on her routine with pain and embarrassment.

“As a woman, I would have to check where the males were going to the toilet and then go in a different direction,” says Devi, 37, standing outside her one-room m&d-brick home. “We used to avoid the daytimes, but if we were really pressured, we would have to go any time of the day, even if it was raining. During the harvest season, people would have sticks in the fields. If somebody had to go, people would beat them up or chase them.”

In the shadow of its new suburbs, torrid growth and 300- _million-plus-strong middle class, India is struggling with a sanitation emergency. From the stream in Devi’s village to the nation’s holiest river, the Ganges, 75 percent of the country’s surface water is contaminated by human and agricultural waste and industrial effluent. Everyone in Indian cities is at risk of consuming human feces, if they’re not already, the Ministry of Urban Development concluded in September.

Economic Drain

Illness, lost productivity and other consequences of fouled water and inadequate sewage treatment trimmed 1.4-7.2 percent from the gross domestic product of Cambodia, Indonesia, the Philippines and Vietnam in 2005, according to a study last year by the World Bank’s Water and Sanitation Program.

Sanitation and hygiene-related issues may have a similar if not greater impact on India’s $1.2 trillion economy, says Guy Hutton, a senior water and sanitation economist with the program in Phnom Penh, Cambodia. Snarled transportation and unreliable power further damp the nation’s growth. Companies that locate in India pay hardship wages and ensconce employees in self- sufficient compounds.

The toll on human health is grim. Every day, 1,000 children younger than 5 years old die in India from diarrhea, hepatitis- causing pathogens and other sanitation-related diseases, according to the United Nations Children’s Fund.

‘Sanitation Crisis’

For girls, the crisis is especially acute: Many drop out of school once they reach puberty because of inadequate lavatories, depriving the country of a generation of possible leaders.

“India cannot reach its full economic potential unless they do something about this sanitation crisis,” says Clarissa Brocklehurst, Unicef’s New York-based chief of water, sanitation and hygiene, who worked in New Delhi from 1999 to 2001.

When P.V. Narasimha Rao opened India to outside investment in 1991, the country went on a tear. For most of this decade, India has placed just behind China as the world’s fastest- growing major economy. Revenue from information technology and outsourcing jumped more than 300-fold to $52 billion a year as Tata Consultancy Services Ltd., Infosys Technologies Ltd. and other homegrown giants took on computer-related work for Western corporations.

Annual per-capita income more than doubled to 24,295 rupees ($468) in the seven years ended on March 31, 2008, before the full force of the financial meltdown kicked in. Even during the current global recession, India’s economy will expand 5.1 percent in 2009, the International Monetary Fund projects.

Hygiene Breakdown

Yet India’s gated office parks with swimming pools and food courts and enclaves such as the Aralias in Gurgaon, outside New Delhi, which features 6,000-square-foot (557-square-meter) condominiums, mask a breakdown of the most basic and symbolic human need -- hygiene.

Devi, who installed her neighborhood’s first toilet, a squat-style latrine in a whitewashed outhouse, created a point of pride in a village where some people empty chamber pots into open drains in front of their homes. Like most of Kachpura’s residents, more than half of India’s 203 million households lack what Western societies consider a necessity: a toilet.

India has the greatest proportion of people in Asia behind Nepal without access to improved sanitation, according to Unicef. Some 665 million Indians practice open defecation, more than half the global total. In China, the world’s most populous country, 37 million people defecate in the open, according to Unicef.

‘It’s an Embarrassment’

“It’s an embarrassment,” says Venkatraman Anantha- Nageswaran, 45, an Indian working in Singapore as chief investment officer for Asia Pacific at Bank Julius Baer & Co., which managed $234 billion at the end of 2008. “It’s a country that aspires to being an international power and which, according to various projections, will be the third-largest economy in 20-30 years.”

India has the highest childhood malnutrition rates in the world: 44 percent of children younger than 5 are underweight, according to the International Food Policy Research Institute.

“Malnourished children are more susceptible to diarrheal disease, and with more diarrheal disease they become more malnourished,” says Jamie Bartram, head of the World Health Organization’s water, sanitation, hygiene and health group. “If we collectively could fix the world’s basic water and sanitation problems, we could reduce childhood mortality by nearly a third.”

Half of India’s schools don’t have separate toilets for males and females, forcing young women to use unisex facilities or nothing at all. Twenty-two percent of girls complete 10 or more years of schooling compared with 35 percent of boys, a national family health survey finished in 2006 found.

Indignity, Infections

Devi says she was concerned that her 14-year-old daughter would suffer the indignity and infections she herself endured due to poor menstrual hygiene. That was a major reason she bought a toilet, taking out a 7,000 rupee, interest-free loan from the U.S. Agency for International Development, which enabled her to pay for her new latrine over 18 months.

The agency also gave her a 3,000 rupee grant and a 2,500 rupee-a-month job with its Cross-Cutting Agra Project, which promotes hygiene and sanitation in her village. Until then, she, like her husband, was unemployed. Her daughter’s situation has also improved, Devi says.

“When she has her period, it’s especially difficult for her to go out into the fields,” she says. “It’s better to have a toilet at home -- as it is for every female.”


‘Remorseless Drain’

“If you’ve got feces all around you, it will find its way into your mouth,” Bartram says. “Cholera and typhoid are always dramatic because they come through as outbreaks, and outbreaks catch the news. The real burden is this long, remorseless drain of straightforward, simple diarrheal disease.”

Like Devi’s village, less than a fifth of Agra is connected to a sewage system. The 1.3 million people generate more than 150 million liters of effluent each day. The city has the capacity to treat 60 percent of the sewage. There are plans to build three more treatment plants by 2012 with funding from the state and federal governments and the Japan International Cooperation Agency, according to the Agra Municipal Corporation.

Taboo Topic

Gandhi focused on the Hindu caste system that subjugated the lowest social stratum to the unsavory realm of latrines. For some 4,000 years, so-called bhangis or untouchables earned a modest living by scraping “night soil” from the cavernous household toilet pits of higher castes and carrying it away in pans balanced on their heads.

 

[cowbehcowbu]

yes,,the recovery in china is mainly by injecting hundreds of billions into mostly in guge industries and conglomerates..also a lot of these liquidity went into stocks n real estate ..causing a bubble ..thus boasting the GDP..the recovery is asymmetrical,,effervescent..[ bubble in nature..]....the real growth in those sectors that affect the majority of business is not so significant.......as easily confirmed by looking at the business of everyday lives..in the streets......
However ..china still can afford to continue to pour trillions into the infrastrutures...and transportation industries...
China has the most capitalist market economies...a socialist social welfare system..a brave and freely expressive common people..and an authocraric one party rule....a most unique social-political system in history.......
is the recovery in china sustainable...no problem..china can continue to construct hundreds of thousand kilometre of high speed trains..equal or more length of high ways....the few tens of thousands kilometre of aquaduct..few hundreds of new power station and solar/wind power plants....with the 2 trillions of reserve....