The Guardian view on the Chinese economy: it
looks bad. What we can’t see may be worse
Editorial
Political tightening and an anti-espionage law make it
harder for outsiders to gauge the situation. How accurately can insiders do so?
Mon 21 Aug
2023 18.25 BST
A spate of
recent statistics shows that the Chinese economy is faring poorly. The country
was supposed to rebound after ditching its draconian “zero Covid” policies,
but, after an initial revival, things have gone awry. Earlier this month it
slipped into deflation. Key indicators, including industrial production,
investment and retail sales, came in well below expectations.
The most
concerning figure, however, is the one that we can’t see. The youth
unemployment rate was suspended from the monthly economic data release, having
reached a record 21.3% in June – suggesting not only that July was grimmer, but
that improvement is not expected soon. The government has stopped publishing
swathes of statistics in recent years. While there are many reasons for that,
and while some may still be released to data firms, it has probably helped to
bury some bad news, and makes it harder to cross-reference information. Chinese
economists are also under pressure to avoid discussing negative indicators.
Under the
Communist party, the economy has always served politics. But the subservience
has not been so marked for decades. Tech giants have been reined in and bankers
ordered to study Xi Jinping Thought. The question is whether political
tightening is affecting not only economic performance, but our knowledge of it.
The primary
concern is the domestic audience, not least because the authorities, reluctant
to turn to a stimulus, need them to spend. (Strikingly, the National Bureau of
Statistics – NBS – stopped publishing a consumer confidence index in April.)
But there is also growing hostility towards the outside world. In June, Beijing
dramatically expanded the definition of espionage in already sweeping and
opaque national security legislation. One key Chinese data provider has begun
limiting access for overseas users.
But the
leadership has its own blind spots. Li Keqiang, premier until this spring, once
told an American diplomat that GDP figures were “man-made” and unreliable.
Analysts like to inspect information from the lowest possible levels of
bureaucracy because they know that figures are massaged at each stage by
officials seeking approbation from superiors.
Close
watchers say that the NBS has worked hard to address such issues, meaning that
at least some data is probably more accurate than before. But in a system where
there is increasing pressure to manifest only “positive energy”, people are
frightened to bear bad news. Not only has investigative reporting been muzzled,
but reportedly even the “internal reference” service for top officials – secret
briefings by journalists and researchers, very different from their published
work – is increasingly hampered by self-censorship or editing by gatekeepers
along the way. Some analysts suspect that those within the national security
system are similarly cautious in passing on information.
“It is a
system which is intended to put blinders on the public but also works for
decision-makers,” suggests the political scientist Prof Dali Yang. His book
Wuhan notes how China carefully created a disease early-warning system after
Sars – only for bureaucratic fragmentation and deliberate suppression of
negative developments to prevent reports of the Covid-19 outbreak from reaching
Beijing in the critical early stages. True, central planners watch the economy
much more vigilantly. They unquestionably have a far better view of it than the
rest of us. The question is whether their information is good, and fast,
enough.
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