What do people in China say when they think there talk is not recorded. Well we have Larry Lang, chair professor of Finance at the Chinese University of Hong Kong.
Matthew Robertson, Epoch Times, 15 November 2011 (Hat tip: NC).
China’s economy has a reputation for being strong and prosperous, but according to a well-known Chinese television personality the country’s Gross Domestic Product is going in reverse.
Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. In his memorable formulation: every province in China is Greece.
He cites five problem areas:
- Too much debt. Adding both the central government, local governments, and state-owned business debt you come up with 36 trillion yuan (US$5.68 trillion) in debt.
- The actual inflation rate, versus the published one of 6.2%, is closer to 16%
- There is to much excess capacity for an economy were only 30% of the economic activity is private consumption. The recent Managers Index report is at a new low off 50.7 which means that rather than growing, manufacturing barely maintaining its current levels..
- Rather than the listed growth of 9%, China’s GDP has decreased by 10%. He said that the bloated figures come from the dramatic increase in infrastructure construction, including real estate development, railways, and highways each year (accounting for up to 70 percent of GDP in 2010).
- Finally, taxes are excessive. Chinese business taxes (including direct and indirect taxes) were at 70 percent of earnings. The individual tax rate sits at 81.6 percent.
He goes on to note:
Once the “economic tsunami” starts, the regime will lose credibility and China will become the poorest country in the world, Lang said.
Note that with enough self denial evidence of a downturn can be ignored for a long time. Employment is generally one of the last items hit in a downturn. Also many of the initial problems will hit one particular secture, and can be seen as an anomoly against the background of the rest of the healthy economy, rather than as the harbringer of things to come. In the United States, an ecomony driven by the housing bubble barely noted the peak of housing starts in August of 2005, and continued to speak of a soft landing well into 2008. We in the United States even take it so far as to manufacture upturns: upturns that generate little additional employment.