Checkpoint Asia

Trump Claims Credit for China’s Astonishing 6.2 Percent Growth

I guess with a growth rate the west can only dream of the Chinese are really screwed here

They are doomed, doomed I tell ya

I find Trump taking credit for China’s declared annualized 6.2 percent growth rate in Q2 2019 absurd on multiple levels:

•  First of all 6.2 percent is an awesomely high number that western countries can only dream of. If anything 6.2 percent would show that China can maintain growth levels the US can only dream of even when the US is going out of its way to drag it down.

•  Secondly exports these days are just 20 percent of China’s GDP and the US is 20 percent of that. A small decline in the 4 percent GDP share that are Chinese exports to the US is not the biggest deal, and is far from China’s biggest problem and source of weakness.

The problem for China is that after the 2008 crisis it took a page out of America’s playbook and started an unwise stimulus program, initially by spending some of its reserves, and eventually by blasting the economy with easy credit. Such policies only create an illusion of wealth and only for a short time, and eventually China would have to pay the price.

That said the everything-bubble in the US is even bigger and while it may take longer to pop, when it does the fallout is going to put all previous recessions to shame.

•  Thirdly, while it is undoubtedly true that China is growing at an enviable rate it’s GDP numbers work differently than in the west. In China the CCP sets a GDP growth target and it falls upon the provinces to conjure up that growth number in any way they can. Thus reading too much into small oscilations of the growth rate is a mistake. (It could theorethically even be caused by the center cracking down on the most fradulent reporting practices albeit I don’t think that is the case in this instance.)

Do not be fooled either, GDP growth numbers in the west are likewise fradulent, primarily because the calculations go out of their way to understate inflation.