China's GDP grew by 10.9 percent in the first half of this year and by 11.3 percent in the second quarter. These figures stunned analysts.
A catch phrase in China says that "numbers make cadres and cadres make up numbers." That is, impressive numbers can promote a party cadre, who can then use his or her power to make up desirable numbers. This interaction between cadres and numbers goes on today: The GDP figures reported by local governments do not match the national GDP.
Even more frightening is fixed asset investment. Generally speaking, 25 percent growth in fixed asset investment is adequate to sustain normal economic development. However, China's grew by 31.3 percent in the first half of this year, pointing to an overheated economy.
Yi Xianrong (
Back when the government was trying to push economic growth to 7-8 percent per annum, officials at every level exaggerated figures to ensure promotion. Once the economy took off, local government officials worried that the central government's macroeconomic controls would hurt their economic interests and so reduced the figures they reported.
The regular approach to managing an overheated economy is to rely on monetary policy and raise interest rates. However, China is facing a unique situation. Over the past two years, officials have warned that the economy is overheated. In April, China's central bank raised its one-year lending rate by 0.27 percentage points for the first time in 18 months. The government's decision to raise only the lending interest rate was aimed at maintaining the policy of stimulating domestic demand.
Why have the authorities kept their foot on the gas? First, many state-run enterprises subsist on bank loans. Increasing interest rates will only make things more difficult for them by increasing bad debt and in turn creating problems for the whole nation.
Second, only rapid economic development and massive investment enables corrupt officials to ply their trade, particularly those officials who approve loans.
In the end, the government can do nothing about its overheated economy but let it continue until the bubble bursts. Chinese Premier Wen Jiabao's (
For the first half of this year, investment in real estate development accounted for 18.2 percent of overall fixed asset investment. If Beijing fails to cool down the overheated real estate sector, it will also be difficult to cool down the overheated economy. Real estate markets, however, are booming at the local government level, making it easy for corrupt officials to make huge profits.
Repeated adjusting of macroeconomic policies means less profit, and therefore foreign investors are made to suffer instead -- as demonstrated by Beijing's decision to impose restrictions on foreign investment in the real estate sector.
If China continues to refrain from political reform and is unable to solve longstanding economic problems, the economy will one day implode. If that happens, foreign investors will become scapegoats or be forced to help Beijing weather its difficulties. This will apply in particular to those who are now leading the drive to invest in China's state-run enterprises.
Paul Lin is a political commentator. Translated by Daniel Cheng
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
In an article published on this page on Tuesday, Kaohsiung-based journalist Julien Oeuillet wrote that “legions of people worldwide would care if a disaster occurred in South Korea or Japan, but the same people would not bat an eyelid if Taiwan disappeared.” That is quite a statement. We are constantly reading about the importance of Taiwan Semiconductor Manufacturing Co (TSMC), hailed in Taiwan as the nation’s “silicon shield” protecting it from hostile foreign forces such as the Chinese Communist Party (CCP), and so crucial to the global supply chain for semiconductors that its loss would cost the global economy US$1
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
Sasha B. Chhabra’s column (“Michelle Yeoh should no longer be welcome,” March 26, page 8) lamented an Instagram post by renowned actress Michelle Yeoh (楊紫瓊) about her recent visit to “Taipei, China.” It is Chhabra’s opinion that, in response to parroting Beijing’s propaganda about the status of Taiwan, Yeoh should be banned from entering this nation and her films cut off from funding by government-backed agencies, as well as disqualified from competing in the Golden Horse Awards. She and other celebrities, he wrote, must be made to understand “that there are consequences for their actions if they become political pawns of