The Chinese government on Oct. 18 released its third-quarter GDP growth statistics, claiming that the economy had grown by 6.0 percent, 0.1 percent lower than expected by a Reuters analysis.
But according to an academic who gave a lecture on the Chinese economy that made headlines last December, the situation is actually far worse.
Xiang Songzuo, a professor at the School of Economics and Finance of China’s Renmin University, posted a brief online comment on Oct. 19 saying that based on mediocre Chinese wage growth and dismal corporate profits, it was impossible that the economy could be increasing at the rate claimed by the authorities:
“If you look at corporate profits, fiscal revenue, and other indicators, things don’t add up and the official GDP growth rate is clearly inflated. In the areas of fiscal revenue and corporate profits, it’s mostly negative growth. National tax revenues also experienced negative growth in the first three quarters. How can it be possible that GDP grew by 6 percent?” Xiang wrote, his translated comment published on Oct. 23 by the non-profit website China Change.
Xiang had previously gained international attention last winter when he gave a lecture on Dec. 16, 2018, explaining the various weaknesses of the Chinese economy. Though circulated on YouTube and other sites, Xiang had been speaking to a closed audience, and the video of his speech was censored in China.
At that time, GDP growth, according to China’s National Bureau of Statistics, was 6.5 percent. However, Xiang said that another “important institution” had come up with a wildly different picture based on other data from the NBS.
“They used two measurements,” Xiang said at the time. “Going by the first estimate, China’s GDP growth this year was about 1.67 percent. And according to the other calculation, the growth rate was negative.”
The full text of Xiang’s Dec. 16 speech was been translated by China Change. His recent comment has been scrubbed from WeChat and Weibo, the Chinese social media sites where it was originally circulated.
Declining entrepreneurial confidence
In his note, Xiang said that “amidst the various disturbances last year,” the Chinese government had failed to create a healthy environment for the private sector, and instead continued to play up the commanding role of the Chinese Communist Party. This failure led to low confidence among those thinking of running businesses or making investments.
“The lack of entrepreneurial confidence, particularly the sharp decline in manufacturing investment, is the key reason for the accelerated downturn in economic growth,” Xiang said.
“How to restore and strengthen the confidence of private enterprises? Without a major reform like Deng Xiaoping’s 1992 Southern Tour, it will be difficult.”
The 1992 Southern Tour was a high-profile trip made by Deng Xiaoping, then the leader of China, to examine the progress of economic reforms in Guangdong Province. For companies and individuals who were worried about the safety of their investments in the wake of the 1989 Tiananmen Massacre, the Tour provided much-needed political assurance.
Xiang believes that at present, the only way to restore private sector confidence is to loosen up the Party’s grip on the Chinese economy.
“How to make private entrepreneurs feel secure, willing to make long-term investments, and keep them from wanting to emigrate and moving their assets away? It must be through giving them freedom, and truly protecting the rights of private property and entrepreneurs with the rule of law.”
‘Too many aspects in need of change’
Xiang also took aim at China’s state-run industries, a major source of corruption and inefficiency in the country, that are, at the same time, seen as an irreplaceable bastion of the Communist Party’s political power.
“Today, have the SOEs really undergone reforms? All we’ve heard is the repeated calls to strengthen the Party’s leadership,” Xiang said. “Where are the reforms that are really able to inspire entrepreneurial vitality?”
In October 2018, current Chinese president Xi Jinping embarked on his own “southern tour,” but experts have noted that the results of this trip fell far short of Deng’s original visit.
SinoInsider, a New York-based political consultancy, said in an Oct. 28, 2018 analysis that while Xi’s tour was intended to preface a major shift in Chinese economic policy, this was undermined by Xi’s rivals within the CCP leadership.
“Observers have noted that mainland media was oddly quiet about Xi’s ‘southern tour,’” SinoInsider wrote. “Xi Jinping’s Guangdong trip was only covered by Xinhua and other Party or state media. Local semi-official newspapers merely republished content from official sources and produced no original reporting or commentary.”
Xiang Songzuo also suggested that the Communist Party’s ideological roadblocks were getting in the way of reforms.
“There are too many aspects of the government and state that are in need of change,” he wrote. “At present, vacuous inspections and studies are probably taking up half the time for many officials. The grassroots cadres are even more miserable. Security inspections and useless work is everywhere.”
The economist noted that many of his insights had come from conversations with local Chinese officials, who were more frank about the bleak economic realities of their country.