China Research

I had my doubts for years about the accuracy of Chinese statistics – a view that I also expressed many times on this page. I also used to add that real progress in accuracy and transparency will take long time to be acknowledged by neutral analysts. This may be the case also right now if we just assume that reported low numbers of new corona infections in China really should be true https://www.worldometers.info/coronavirus/. Anyway, one has to wonder how reality will look like when Wuhan now gradually returns to normality.

Obvious strategy dilemma
In my view, Chinese political leaders right now struggle with two possible strategies – or even a combination of these two strategies. One strategy is to show the superiority and efficiency of the Chinese system compared to the Western world, aiming at least at finding strong support by the Chinese people. Another strategical priority may be to relatively smoothly turn back GDP growth to acceptable levels in order to present China’s economy as strong and clearly recovering during the Communist Party’s 100^th anniversary year of 2021. Of course, one may suggest that these two strategies are linked to each other.

The first test in this respect will be the statistical outcome of national GDP accounts for Q1 this year. Will it be a very weak number in order to allow for a relatively good recovery later this year? Or prefer the highest decision-makers a still quite moderate slowdown in order to achieve rather a smooth downsizing of the Chinese economy during 2020 -with the objective to avoid an uncomfortable statistical slowdown of average GDP growth this year?

Compromise?
My own belief is that China’s political leadership will compromise between these two strategic approaches. However, it seems to be impossible to have an idea about the preferred bias. Thus, it can be recommended to follow developments in China and political statements from there as closely as possible.

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