30
Dec

Last Monday, at the conclusion of China’s closed-door Central Economic Work Conference, Beijing’s public relations machine went into high gear to show that the country’s leaders had come up with a viable plan to rescue the economy.

Unfortunately, they do not now have such a plan. In reality, they decided to continue strategies that both created China’s current predicament and failed this year to restart growth.
The severity of China’s economic problems—and the inability to implement long-term solutions—mean almost all geopolitical assumptions about tomorrow are wrong. Virtually everyone today sees China as a major power in the future. Yet the country’s extraordinary economic difficulties will result in a collapse or a long-term decline, and either outcome suggests China will return to the ranks of weak states.

As an initial matter, China’s current situation is far worse than the official National Bureau of Statistics reports. The NBS maintains that the country’s gross domestic product rose 6.9 percent during the third calendar quarter of this year after increases of 7.0 percent during each of the first two quarters.

Willem Buiter, Citigroup’s chief economist, a few months ago suggested the rate was closer to 4 percent, and growth could be as low as the 2.2 percent that people in Beijing were privately talking about mid-year. The most reliable indicator of Chinese economic activity remains the consumption of electricity, and for the first eleven months of the year electricity consumption increased by only 0.7 percent according to China’s National Energy Administration. Read more…

Published on Dec. 29 in nationalinterest.org 

Gordon G. Chang is the author of The Coming Collapse of China.

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