China

Semi-knowledge about China is risky

Tuesday, August 7th, 2018

We are living in a rapidly working and changing (economic) world. This development also leads many times to less profound analysis and reading. Conditions have been – and are – changing both on the analytical demand and supply side. More people express their opinions – but decreasingly based on profound skills. And less people want to spend much of their limited time on deep intellectual penetration of different special areas. The demand for good, deep and comprehensive general knowledge seems to be declining.

I do not motivate these brief conclusions by the latest results from economic and social research. Instead, I apply many years of my own experience from industry, financial markets and academia – and also proven and undisputed results from (academic) research.

What really worries me is the obvious fact that so many articles and reports on China obviously are reflecting semi-knowledge. Good understanding of Chinese politics and economic conditions or developments is certainly not an issue one can deal with briefly or occasionally – which unfortunately often seems to be the case. Analysis of China may be knowingly or unconsciously. In my view, the latter alternative is dominating.

Here we come to Nobel Prize winner Robert Shiller. In his book “Irrational Exuberance” (p 142), Shiller discusses a phenomenon called “overconfidence” which he defines by writing “people think they know more than do. They like to express opinions on matters they know little about, and they often act on these opinions …”

In other words: semi-knowledge exists indeed and can become very risky. Ambitious and future-oriented countries should not become dependent on strived special skills in IT and AI – but should also do a lot for improvements of general knowledge. I believe that the Chinese have understood this dualism better than many political and corporate leaders in the West. At least I still cannot find good evidence that necessary educational efforts for improving general knowledge are really taking place on a broad scale in our part of the world. It may be a structural problem in times of speed, electronic games and modified spare time with – probably – less interest in reading. Updated research on this area would be very interesting.

Conclusion:

A good understanding of China assumes deep and regular studies of this – by its enormous size – continental country. Overconfidence is always risky – but particularly when it comes to China.

 

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

 

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China – analytical transparency remains limited

Tuesday, July 10th, 2018

Economic reporting from China to foreigners has certainly improved quite a lot during the past 10-15 years. This is, of course, positive. However, these improvements seem to be mostly appreciated by foreigners who are not looking for special statistical details or more far-reaching results from social or economic research.

Certain daily Chinese newspapers have nowadays printed and even electronic versions in English, frequently with interesting (economic) news. But there are often annoying restrictions or impediments when more detailed information is needed. Trying to find more detailed access to the original authors or publishers of interesting reports usually tends to fail – contrary to what we are used to in our part of the world from our own institutions.

This described problem is indeed not in line for a country aiming at becoming the largest economy in the world and – nota bene – at being recognized as a market economy. So far, I have not even taken up Chinese economic statistics and reports in pure quality terms. However, qualitative shortcomings in these areas can only be found and improved when decent transparency already is in place. Transparency is the key to many positive developments!

Our latest China Panel Survey (https://blogg.lnu.se/china-research/files/2018/05/ChinaPanelSurvey-May-2018.pdf) from May this year still sees the quality of economic statistics at insufficient 4.1 (on a scale from 1 – 10, 10 = very good). There is no improvement in the past few years, according to our experts. And only few China analysts in OECD countries complain about this disappointing institutional development – which probably adds further to China’s lagging analytical transparency.

Perhaps, there is too much semi-knowledge about China in our part of the world – also with professional analysts at financial institutions, political organizations and corporate organizations outside China. Semi-knowledge may induce fewer complaints.

Find more about semi-knowledge in my next China blog!

 

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

 

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Trump confuses China – argues against the market economy

Wednesday, May 23rd, 2018

Foreign policy and international trade policy by the United States are certainly confusing these days. Trade frictions with China get new dimensions almost daily. This is also worrying for the rest of the world.

I do not want to discuss here why China and many other countries do not want to buy more American goods. And I do not want to check further to what extent China would be theoretically able to reduce its trade surpluses with the U.S. by as much as 200 billion dollars; this has indeed been done before in a number of well-informing articles.

Instead, I want to concentrate this blog on an angle that – as far as I know – has not been illuminated at all or at least very much neglected. As many observers of China know, China has been fighting for a long time to be recognized as a market economy – an objective that has been turned down regularly by the U.S. (and by the EU). In my view, this rejection remains motivated since the Chinese economy and corporate sector still are based on a lot of government influence, permissions and decisions – despite the fact that more than half of the country’s GDP is produced by officially private firms.

But we also know that the influence of the Communist Party more recently rather has been increasing than the other way around. At the same time, smart Chinese political leaders have certainly found out that political interventions to achieve drastically reduced trade and current account surpluses with the U.S. certainly cannot be brought in line with the goal of gaining recognition as a market economy.

In other words, Trump wants China to break against the rules of a market economy and at the same time to maintain the arguments against China for not being mature as a market economy. It is like squaring the circle. We can be sure the president Xi Jinping understands the dimensions of this side of the trade problem. This is one of the reasons why he has been strongly revaluing foreign policy more recently, also by important personal appointments and his own increasing involvement in foreign policy.

However, nobody knows how the Trump administration’s conflict with China will end. In the longer run, the trade conflict between the U.S. and China is certainly not good for the global economy.

 

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

 

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