For the first time since it overtook Japan as the world’s second-largest economy back in 2011, China has displayed surprisingly weak economic data that have somehow obscured the widely held, if rarely discussed in public belief that these data, which are compiled by the Chinese state, are largely suspect. Contributing to its goal of maintaining order and stability at home, the Communist Party is widely believed to doctor and goalseek its data to present a rosier picture. Apparently, the notion that this is probably happening has become so widely accepted that investors often lose sight of it.
But in an well-timed reminder, the Financial Times has published a story citing a presentation by a controversial yet widely recognizable Chinese economist and others who argue that China’s GDP growth could be much weaker than the official data – which showed the Chinese economy grew at an annualized rate of 6.7% through the third quarter – reflect.
To the consternation of Chinese censors, a presentation delivered by an economics professor at Renmin University in Beijing sparked a controversy last month when the professor claimed that a secret government research group had estimated China’s growth in gross domestic product could be as low as 1.67% in 2018, far below the official rate.
Even experts who are skeptical of the official data dismissed the presentation, delivered by a professor Xiang Songzuo, as unrealistic. Yet despite being scrubbed from Chinese social media and the mainland Internet, the presentation has been viewed 1.2 million times on YouTube (clip above), suggesting that Xiang’s warnings are resonating with everyday Chinese consumers, who are struggling with one of the worst-performing stock markets of 2018, a collapsing shadow lending sector, a crackdown on China’s vast online peer-2-peer lending infrastructure, and a currency that has weakened significantly over the past 12 months.