China

China abandons ambition to be acknowledged as market economy

Tuesday, July 14th, 2020

International recognition has been given high priority in the past few decades by China’s political leaders. Being welcomed by the WTO as a new member in 2001 was celebrated as a brilliant success in Beijing and the whole country. I could see it with my own eyes during a simultaneous visit in Beijing. An enormous new potential was opened for Chinese exporters but also for globally oriented foreign companies in this largely promising country. Without doubt, one may conclude that China turned to be the winner of globalization in the past twenty years, meaning also quite some opening up during this time.

But what about this spirit of opening up in the future? First signals of giving domestic objectives even more priority are obvious. Interventions in Hong Kong, increasing surveillance, declining transparency (covid-19), less calming diplomacy vis-à-vis the United States and relatively easily accepted abolition of the market-economy objective point indeed at stronger prioritization of domestic issues and (somewhat) lesser international harmony considerations. However, it should be kept in mind that China still maintains a neutral and even collaborative voice in its contacts with the EU.

No chance to be recognized as a market economy

Five years ago, there was a lot of pressure on the EU to finally give China the status of a market economy. Such an improved classification would have meant for China a milder treatment by the WTO with dumping conflicts. However, the EU never wanted to give such a mandate to the WTO. China has now canceled these ambitions and has therefore to accept possible anti-dumping accusations also in the future. Obviously, this formerly important international goal had become less relevant after many years of waiting and not really worth-while to go on fighting for.

Also when analyzing more deeply the whole question, it was impossible to find neutral arguments for a Chinese upgrading to market economy (see also my comments on this from 2016, https://blogg.lnu.se/china-research/?p=2164). China still has by far too much government in the economy and by far too weak institutions. No doubt about this!

However, all this has not necessarily to lead to negative consequences for global trade. I do not rule out completely that China will try to keep down future dumping charges as much as possible. Time will tell us.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Unemployment – the most unusable indicator in China?

Thursday, June 25th, 2020

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Arbetslösheten – Kinas minst användbara konjunkturindikator?

Brief summary / sammanfattning

Kvaliteten i Kinas ekonomiska statistik har aldrig haft gott anseende bland flertalet utländska Kinaforskare. Tillämpningen av vettiga tidsserier har alltid varit synnerligen begränsad. Den officiellt redovisade arbetslöshetsstatistiken framstår som den kanske minst användbara konjunkturindikatorn för internationella bedömare. Arbetslöshetsstatistiken är helt enkelt inte tillräckligt omfattande.

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After having dealt with Chinese official statistics during 30 years, I still have the concrete impression that the monthly, quarterly and annually published economic numbers never could give me a feeling of applicable and comfortable accuracy (e.g. in: Finance India. The Quarterly Journal of Indian Institute of Finance, ISSN 0970-3772, Vol. 25, no 4, s. 1189-1207). Too many statistical inconsistencies could be found more or less regularly over the years. Other (academic) economists came to the same conclusion.

Referring to the corona virus, I pointed some months ago at the new opportunity for the official China to create better transparency – and by a new policy of improved openness to achieve an upgrading of its international reputation (see my article here on chinaresearch.se from April 14, 2020). And I strongly argued for the view that China itself could have benefited from such a policy change.

Unfortunately, China did not want to go for such a new direction. This also means that unemployment numbers will continue to be the same conundrum as they have been in the past decades.

Unemployment statistics covers only a limited part of the economy

Two different measurements of unemployment rates can quite easily be found in official statistics, one for 31 metropolitan cities and one for total urban unemployment http://data.stats.gov.cn/english/easyquery.htm?cn=A01. But also in this blog’s limited context show up a number of questions without good possible answers, quoting here some of them.

¤ Rural unemployment is not included in the official – survey-based – unemployment numbers. Is this a curable major shortcoming?

¤ There is no good estimate about migrant workers working occasionally in the cities, in good times according to the authorities up to 300 million people – and now may be half of it. One has to wonder where these newly unemployed people have gone in reality and in statistics?

¤ Also officially confirmed, migrant workers accounted last year for roughly one third of the Chinese labor force. Based on this number, it puzzles quite a lot that total urban unemployment in the 31 major cities merely rose from 5.3 % in July 2019 to 5.9 % in April 2020.

No clear answers to be expected

Increasing unemployment may be the most crucial issue for China’s leadership, both politically and socially (which is interconnected). For this reason, promising opening up in unemployment communication will not take room in the foreseeable future – unless the economy unexpectedly will face an explosive and sustainably strong recovery.

Who believes in such a development?

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Emerging markets need less covid-19 and good recovery in advanced countries

Friday, June 12th, 2020

Whatever emerging country one looks at, it seems easy to find out that covid-19 still has a negative impact on this group of countries, regardless whether they are already quite advanced emerging markets or very much lagging in their economic development. At the same time, one may also conclude that it has to be realized once more how strongly dependent emerging markets still are on growth development in the OECD area.

Furthermore, we once more have to recognize the problems that arise from lagging transparency and poor statistical quality in most emerging countries. It should be taken as granted that statistical numbers in hidden reality should not be more favorable than officially reported (which, however, indeed happened somewhat more than a decade ago with Chinese GDP growth).

Currently, many official statistical economic indicators in a substantial number of emerging markets again give reason for concern, sending clear warning signals. These warning signals may be related to the balance on current account, budget deficits, foreign debt, inflation etc.

Emerging countries with ongoing macroeconomic troubles and vulnerability can be found on all continents. Just to mention a few: Brazil, Venezuela, Argentina, Chile, Ecuador, Egypt, South Africa, Nigeria, Turkey and Indonesia  – China and India not being analyzed particularly in this context.

Emerging countries need a V recovery in western countries and a turning for covid-19 themselves

Covid-19 has, unfortunately, hit both advanced and emerging countries. However, in both groups of countries uncertainty about the real degree of corona infections remains unclear. Too many countries all over the world have no clue about their own hidden infections. The number of deaths may give some slight indication about the seriousness of the pandemic in certain countries. But we still know too little about this also in our part of the globe, and even less about the real situation in emerging countries.

Statistics can be daily found here https://www.worldometers.info/coronavirus/. In this summary, we find many emerging markets with by far less deaths per 1 million inhabitants than in most Western countries. This fact can certainly be related to so far fewer infected people and many more unregistered deaths in emerging countries. However, we know nothing about the future pandemic in South America, Africa and Asia.

Altogether, it can be concluded that most emerging countries will need to go three steps to their own recovery:

¤  first step: a successful fight against covid-19 in Western countries,

¤  second step: a (starting) recovery in the OECD-area, preferably V-shaped,

¤  third step: a turning point for corona in the individual emerging country.

This will indeed take quite some time!

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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