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China’s Economy: Miracle or Mirage?

October 21, 2020

Episode Notes:

On Monday, China posted economic growth figures for the quarter that ran from July to September, indicating that their economy grew by 4.9% compared to the same quarter last year. Although this figure is lower than the 5.2% figure expected by many economists, it represents a substantial increase from the first quarter when China reported that its economic output had shrunk by nearly 8% compared to the same quarter last year, largely due to disruptions caused by COVID-19. Many scholars and analysts consider the size of an economy to be an important indicator of national power. Indeed, one commonly used assessment of China’s rise as a global power to rival the United States is the prediction that their GDP will exceed that of the U.S. at some point in the near future.

 

But what do we really know about China’s economic growth? The growth numbers are released by the Chinese government, which has a motivated interest in presenting an image of rapid, sustained growth. But, like much else in the People’s Republic of China, it can be remarkably difficult to determine if those numbers are accurate due to a lack of transparency and ubiquitous government control of information sources. How do we really know how quickly China is growing in economic power, or if it is growing at all?

 

To help us better understand this issue, we are joined by Derek M. Scissors, a resident scholar at the American Enterprise Institute (AEI), where he focuses on the Chinese and Indian economies and on U.S. economic relations with Asia. He is concurrently chief economist of the China Beige Book.

 

 

[ 02:24 ] First, do you believe that the growth numbers released on Monday are accurate? If not, what leads you to suspect they are wrong?

[ 05:36 ] Do other nations follow a similar practice of “fudging” the numbers? If so, is there a difference in degree in China’s practice?

[ 07:05 ] In the absence of government transparency and accurate information, what are some good indicators that suggest the actual size/growth rate of the Chinese economy?

[ 10:33 ] Inflating the reported numbers doesn’t actually increase China’s economic capacity—what benefit do they derive from such a practice?

[ 11:53 ] What does this mean for understanding China’s military capacity?

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