A Test For China’s Propaganda Machine

The main purpose of the GDP growth numbers and most other economic statistics reported by China’s government is to tell the story that the central committee of the Communist Party wants to tell. In other words, the economic numbers form part of the State’s propaganda.

For example, during the first decade of this century the Party’s objective was to show that the economy was performing in spectacular fashion, so the reported GDP growth numbers were almost never below 8% and regularly above 10%. In more recent years the overriding concern has been to paint a picture of stability and sustainable progress, which has involved reporting consistent GDP growth in the 6%-7% range. Refer to the following chart for more detail. Amazingly, most Western analysts accept these figures as if they were accurate reflections of reality, partly, we suspect because there is no way to prove that what’s being reported is bogus.

Once in a while, however, something happens that shines a light on the meaninglessness of the official numbers. An example was the claim by China’s government that its economy was still growing at an annualized pace of more than 6% during the worst point of the 2007-2009 global recession. Another example very likely will be the quarterly GDP growth that China’s government reports for the first quarter of this year.

The consensus view in the financial news media appears to be that due to the SARS-CoV-2 virus, China’s GDP growth rate in Q1-2020 will slide from 6%+ to ‘only’ 4%-5%. The reality, however, is that China’s economy could not be growing at the moment. Large sections of the country have been essentially put in lock-down mode, and many factories, restaurants, shops and other businesses have been temporarily closed. Tourism has ground to a halt, home sales have collapsed by 90% and vehicle sales are expected to fall by 50%-80% from the same period last year. In some large Chinese cities, including Shanghai, the government has directed state property owners not to collect rent from small- and medium-sized businesses during February and March.

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