Tuesday, April 23, 2002

China's economic statistics

The ever insightful Jane Galt highlights a story concerning the possibility that China has been fudging its economics numbers to show much higher economic growth than is actually occurring.

I think it is quite likely (nearly certain?) that this is indeed the case.

Motive: By reporting high economic growth numbers, China gives the impression to companies and investors throughout the world that they are the next great market and that they would be foolish to miss out on investment opportunities in their country. The high economic growth numbers reported may actually increase economic growth! It is a classic self-fulfilling prophecy. Certainly the "China's economy will be bigger than the U.S. in....", meme has been one that one who follows economics has heard many times. There are very real costs to the Chinese economy if this idea starts to be questioned.