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  • VIEW: Blinded by China’s false statistics

    VIEW: Blinded by China’s false statistics —Jonathan Power

    McKinsey, the management consultancy, reports that only 10 percent of China's graduating engineers are good enough to work for foreign companies. It is not surprising that China's software industry lags behind India's because of its fragmented structure and poor management

    Beware of extrapolation, a British Chancellor of the Exchequer once remarked: it can make you go blind. It’s about time this little piece of wisdom was applied to China. But there seems to be a mental block that inhabits newsrooms, academic common rooms and the bureaucracies of many governments. This is despite the pioneering research done by the likes of Professor Lester Thurow and the conclusion of long-time Hong Kong-based China watcher, economist Jim Walker, of Asia’s leading independent investment bank, CSLA, both of whom have rigorously deflated the wild claims of China’s official growth statistics, which once again recently got the big headline treatment. Walker concludes that official GDP statistics are a “fantasy world”.

    In China’s provinces, the statistics are notoriously unreliable, as local officials inflate them to avoid being punished for poor management of the economy. For its part, the central statistical office calculates GDP through counting increases in value-added production even though much of its statistical information comes from state-owned enterprises that provide poor data. Walker routinely deducts 2 percent from official Chinese growth statistics. This summer, in a little noticed announcement, the Asian Development Bank lopped 40 percent off previous Chinese income per head statistics. That is some revision.

    Even if we use Chinese statistics, the overall rate of progress between 1978 and 2003 is not overwhelming. In that period China’s per capita GDP grew at a compound rate of 6.1 percent. This gives an increase of 337 percent over a quarter of a century. Compare this with Japan’s, which increased by 490 percent between 1950 and 1973. Both South Korea and Taiwan have done even better the former with 7.6 percent compound growth a year between 1962 and 1990 and Taiwan with 6.3 percent between 1958 and 1990, the years when they were bursting through the industrialisation sound barrier.

    The statistics we do have show up some near-insuperable problems. One is that 40 percent of Chinese bank loans are considered “bad”, a gigantic misallocation of capital. Another is that China could grow old before it grows rich. Not very long ago China was one of the world’s most youthful countries. But the one-child policy has had an enormous impact. As early as 2015 China’s working age population will begin to fall. By 2040, just a decade before China hopes to be a middle-income country, it will have 100 million citizens over 80. That is more than the current worldwide total.

    Arnaud de Meyer, deputy dean of INSEAD, the European business school, author of a study on Asian innovation, writes that in relation to its huge development needs, China may already have too little skilled manpower. McKinsey, the management consultancy, reports that only 10 percent of China’s graduating engineers are good enough to work for foreign companies. It is not surprising that China’s software industry lags behind India’s because of its fragmented structure and poor management.

    India is far ahead in this regard. India has “an enviable pool of high quality talented professionals”, reports a study by Mercer Human Resource Consulting. Moreover, wages among professionals are much lower in India than China. Living costs in Chinese cities are much higher than in India’s.

    It is not surprising that foreign direct investment is now falling in China, albeit from very high levels (and at the same time capital flight is on a fast rise), while India’s is increasing. If one looks at the non-ethnic Chinese component of foreign investment, China does less well than booming Brazil.

    US companies earn something over $8 billion a year from their business and investments in China. But they earn around $7 billion from Australia, a market of only 19 million people and over $9 billion from Taiwan and South Korea with a combined population of 90 million. From Mexico, they earn over $14 billion. Moreover, the American companies that have made big money from China are those like Wal-Mart, the retailer. They are the ones who buy from it rather than the ones who invest in it.

    Angela Merkel, the Chancellor of Germany, has taken a lot of flack from China and from her Social Democratic partners in government for talking to the Dalai Lama and being vocal about Chinese human rights failings. She should have no fear - China needs Germany much more than vice-versa.

    It has always been strange. It is quite pathetic that Western countries regularly betray each other, and, in so doing, the human rights activists inside China, in an effort to better position themselves in this quite modest marketplace. If Western governments could stand shoulder to shoulder and say once and mean it: “stop using economic and trade threats, you are in no position to do so, it is unacceptable behaviour”, Beijing would get the message.

    But perhaps after years of propaganda on China’s “remarkable future progress”, we are already blind.

    The writer is a leading columnist on international affairs, human rights and peace issues
    Link: Daily Times - Leading News Resource of Pakistan

    Posted without comments. Pl. share your opinions.
    There are 10 kinds of people in the world, those who understand binary and those who don’t..

  • #2
    Originally posted by WhamBam View Post
    Link: Daily Times - Leading News Resource of Pakistan

    Posted without comments. Pl. share your opinions.
    Probably, there are both accurate and not so accurate information in this article.

    I can give some summary on China’s official 2007 economic self-evaluation:

    The problems for China’s 2007 economy:

    1. The regional imbalance of economic development continues to get worse.

    2. The pollution problem has not been improved.

    3. The improvement on the unit profit consumption of energy and raw material is still dismal.

    4. The infrastructure investment is still overheating at very high level.

    5. International trade imbalance continues to increase and the foreign reserves increase too fast.

    6. Domestic demand increase didn’t reach the level as wished.

    7. Domestic saving is still too high.

    8. Inflation increased to the record level in the recent years.

    9. The growth is still concentrated in the traditional industry.

    10. The growth in the areas like precision manufacture, information technology, biomedical had some bright points but overall didn’t make big break through as wished.


    The achievements for China’s 2007 economy:

    1. GDP takes over Germany becomes the world third largest next to US and Japan.

    2. Export takes over Germany becomes the world largest and the ratio of the high-tech exports continues to increase.

    3. Import takes over Germany becomes the world second largest next to US.

    4. The profits of 2 Chinese banks take over the Chinese oil company and become No 1 and No 2 the first time in many years.

    5. Average profit of Chinese companies jumped near 30% compare to last year.

    6. Chinese government tax income jumped near 30% compare to last year (So, please don’t be surprised if China continues to increase its defense budget by double digits again).
    Last edited by Zeng; 05 Dec 07,, 03:31.
    I am here for exchanging opinions.

    Comment


    • #3
      Thanks for your inputs.

      I have no doubts that China has been doing very well economically. In many ways a great success story!

      But is it also overhyped in many ways? And are lots of people and governments ignoring the many inevitable challenges and simply extrapolating the current growth which may be difficult to sustain due to so many reasons I have seen articulated on this forum?
      There are 10 kinds of people in the world, those who understand binary and those who don’t..

      Comment


      • #4
        China just announced that the GDP growth goal is to quadruple the 2000's GDP by 2020, which means that China needs to grow at an average annual rate of ~5.6% from now to 2020.
        I am here for exchanging opinions.

        Comment


        • #5
          Originally posted by Zeng_xinren View Post
          1. GDP takes over Germany becomes the world third largest next to US and Japan.
          New statistics came out and China’s GDP didn’t take over German in 2007 because the EURO appreciated too much beyond expectation.

          According to the new statistics, in 2007, Chinese GDP increased ~11.5% based on RMB, Chinese RMB appreciated ~6.5% against US dollar and devalued ~4% against EURO. Germany GDP increase 2.5% based on EURO.

          But 2007 Chinese government tax income increased 31.4%.
          Last edited by Zeng; 18 Jan 08,, 04:59.
          I am here for exchanging opinions.

          Comment


          • #6
            Just like this forum states..........I don't trust China's "STATS".!!

            Comment


            • #7
              yep like the man said
              there are lies damn lies and statistics
              For Gallifrey! For Victory! For the end of time itself!!

              Comment


              • #8
                Childish..........


                No economist worth his salt will only use a single government (any government) issued stat to do his/her work. If professional folks do not question the quality of the data, they are not doing their job.

                and I have a feeling that the reason you posted this article because of this statement "It is not surprising that foreign direct investment is now falling in China, albeit from very high levels (and at the same time capital flight is on a fast rise), while India’s is increasing. If one looks at the non-ethnic Chinese component of foreign investment, China does less well than booming Brazil."

                That statements need some major backing, in additional, one have to examine that type of stat Jonathan Power used to justify the claim, it goes both ways.
                Last edited by xinhui; 21 Jan 08,, 08:07.
                “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

                Comment


                • #9
                  Originally posted by bolo121 View Post
                  yep like the man said
                  there are lies damn lies and statistics
                  Originally posted by Bella View Post
                  Just like this forum states..........I don't trust China's "STATS".!!
                  It is OK for not agreeing with my comments and data. Please provide your data and give the reference or analysis to support your data.

                  At least Chinese official report mentioned both problems and achievements. It also makes adjustment based on the new currency-changing rate.

                  Somehow, on the WAB we always have these kinds of loose-ended humorless comments from these really “intelligent and educated” people. Please make effort to learn how to give better quality comments.
                  I am here for exchanging opinions.

                  Comment


                  • #10
                    Why is it that everything I buy, everything I see on the shelves here in the UK is "Made in China" ????????????????

                    I was out walking my 7 month old grandson the other day and popped into a toy shop, and found a toy from a BBC kids prog he loves, so bought it (£15) and he loves it but - a BBC toy, made in China!!! £15 to buy, 15p to make.

                    Comment


                    • #11
                      Originally posted by Elbmek View Post
                      Why is it that everything I buy, everything I see on the shelves here in the UK is "Made in China" ????????????????

                      I was out walking my 7 month old grandson the other day and popped into a toy shop, and found a toy from a BBC kids prog he loves, so bought it (£15) and he loves it but - a BBC toy, made in China!!! £15 to buy, 15p to make.
                      Expensive because of greed. Built like crap and will probably cause bodily harm because of poisonous materials and non-existent quality control(unless Zeng_xinern is in charge....he likes everything his Government tells him).

                      Comment


                      • #12
                        Originally posted by Elbmek View Post
                        Why is it that everything I buy, everything I see on the shelves here in the UK is "Made in China" ????????????????

                        I was out walking my 7 month old grandson the other day and popped into a toy shop, and found a toy from a BBC kids prog he loves, so bought it (£15) and he loves it but - a BBC toy, made in China!!! £15 to buy, 15p to make.
                        Elbmek,

                        I am not an economic expert. Some economic experts here on the WAB may be able to answer your question in more detail why is many things you buy in UK "Made in China" and why a BBC toy, made in China!!! £15 to buy, 15p to make.

                        As I heard that toy industry itself has very small profit margin. Most profit goes to the huge retailers like Walmart. But I don't have data to show the distribution of the cost and profit for a toy made in China.

                        May be some economic experts can show us the data. Thanks in advance.

                        Also, because China issued new Labor Law and new Environmental Law Initiative, we heard that there are around 30% foreign companies complained about the cost increases associated with these new Laws. They threaten to move out from China. Most of these companies are in toy or textile industries. So, in the future, you may be able to buy those toys Made in other countries.

                        Chinese Labor Law Reform: Guaranteeing Worker Rights in the Age of Globalism - Worldpress.org

                        EPA - China Environmental Law Initiative Home | US EPA
                        Last edited by Zeng; 01 Apr 08,, 02:47.
                        I am here for exchanging opinions.

                        Comment


                        • #13
                          Originally posted by Exarecr View Post
                          Expensive because of greed. Built like crap and will probably cause bodily harm because of poisonous materials and non-existent quality control(unless Zeng_xinern is in charge....he likes everything his Government tells him).
                          Exarecr

                          As far as I know, most military professionals on the WAB making good quality posts. Loose-ended humorless comments like this make me wonder whether all military professionals have the same kind of professional training.

                          Why this military professional never learnt a correct way to make an argument when he was in school? Did he seat by a beautiful girl to loss his concentration on study all the time or did he always sleep on the class for whatever reason?

                          Why he does not argue with my specific comments instead of just make a blank accusation? Could he read english to understand my comments or my english wording is too bad for him to understand?

                          I listed China’s official 2007 economic self-evaluation of 10 problems and 6 achievements. By the end of the year, they removed 1 or 2 achievements. I listed them here for discussion. You are more than welcome to argue with what I listed and give us your data and reference to support your argument.

                          Which of the 10 problems I listed you don't agree? Which 4 or 5 achievements I listed you have problem? What is your opinion about my list. Any intellegent input is welcome.
                          Last edited by Zeng; 01 Apr 08,, 04:06.
                          I am here for exchanging opinions.

                          Comment


                          • #14
                            Originally posted by Zeng_xinren View Post
                            Elbmek,

                            I am not an economic expert. Some economic experts here on the WAB may be able to answer your question in more detail why is many things you buy in UK "Made in China" and why a BBC toy, made in China!!! £15 to buy, 15p to make.

                            As I heard that toy industry itself has very small profit margin. Most profit goes to the huge retailers like Walmart. But I don't have data to show the distribution of the cost and profit for a toy made in China.

                            May be some economic experts can show us the data. Thanks in advance.

                            Also, because China issued new Labor Law and new Environmental Law Initiative, we heard that there are around 30% foreign companies complained about the cost increases associated with these new Laws. They threaten to move out from China. Most of these companies are in toy or textile industries. So, in the future, you may be able to buy those toys Made in other countries.

                            Chinese Labor Law Reform: Guaranteeing Worker Rights in the Age of Globalism - Worldpress.org

                            EPA - China Environmental Law Initiative Home | US EPA
                            Thanks for the info. I blame exploitation and greed.

                            Comment


                            • #15
                              Originally Posted by Exarecr
                              Expensive because of greed. Built like crap and will probably cause bodily harm because of poisonous materials and non-existent quality control(unless Zeng_xinern is in charge....he likes everything his Government tells him).
                              Are the companies who commission for this work from China not responsible for the final product that they get? They are the ones that specify the design, the method of production and the materials used. Why can they not put in stringent checks? That will probably drive the cost of production to what - 20p instead of 15 p? That would still leave them with a profit of £15 - £0.20 (I am tired, do the math yourself). They can choose not to accept the product. Yet the last post made by Zeng proves that the foreign companies are unwilling to pay for that extra quality.

                              Why blame the Chinese, or any other low cost manufacturing country, for that?

                              Originally Posted by Zeng_xinren
                              [QUOTE]
                              6. Domestic demand increase didn’t reach the level as wished.
                              7. Domestic saving is still too high.
                              8. Inflation increased to the record level in the recent years.
                              QUOTE]

                              Zeng,

                              Here is a good article from the Wall Street Journal. What seems of special concern is that of the 8.7% inflation figure, about 90% is attributable to food prices alone, while around 5% is driven by rising enrgy prices.

                              China and Core Inflation - WSJ.com

                              The seems to a worldwide phenomenon and India has a similar problem. However, I am not sure why China has such a severe case of food related inflation. I hope their food security is not at stake.
                              "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

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