Breakout

Forget the Data, Chinese GDP Is Actually Near Zero Says Gordon Chang

Breakout

A familiar retort that has been used by both sides during the election season is that ''the math just doesn't add up'' when challenging the fiscal reality or financial feasibility of a particular candidate's claim or plan.

And so it is with Gordon Chang, author of The Coming Collapse of China and contributor to Forbes Magazine, whenever he looks at China's official GDP results, in which the most recent data showed Q3 GDP rising 7.4%, or today's HSBC Flash PMI data which rose to a 3-month high of 49.1. While still below 50, and technically reflecting contraction, the word from the mainland is one of encouragement and that worst is over.

''It just doesn't make sense," Chang says in the attached video, claiming that the true number is probably zero or 1%. "This number is not consistent with what we know about the Chinese economy."

Not only does he say that GDP growth of that magnitude would coincide with comparable increases in electricity consumption, he says it also doesn't jibe with a report that showed a 3% decline in wholesale and seems out of whack with with inflation that's slipped below 2%.

"It doesn't compute," Chang says, arguing that the average monthly increase in electricity production was 2.1%, adding that it historically outpaces GDP and has been among the most reliable economic barometers, too.

Another area of concern for Chang is the potential for unrest. While the saga surrounding workers at the Foxconn factories where Apple gadgets are made has been well covered, Chang says it barely touches on what is happening on a broader scale.

"Across Chinese society, the one factor that people always talk about is the anger," he says. But the reality is that the central government in Beijing no longer produces statistics on uprisings and protests, which by his estimates are now probably occurring at a rate that is ''north of 200,000 per year."

And finally, he's awaiting the results of China's once-a-decade process of selecting new leadership when the 18th Communist Party Congress begins on November 8. From Chang's perspective, the country known for its ironclad one party rule could be entering what's locally referred to as a period of "two suns in the sky." By this he means a new leader may have to share the spotlight with current President Hu Jintao, who is reputed to want to linger in the limelight after his term has officially ended. In addition, he says former President Jiang Zemin may even resurface as a "third sun," further complicating any transition and muddying the authority and message of the new leader.

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