Inflation officially drops, but it is not true as China edges ever closer to a crisis
by Paul Hong
China’s National Bureau of Statistics said today that inflation in November was 4.2 per cent. However, a closer look at prices shows that some have jumped as much as 36 per cent. Provincial and central government spending on dinners, receptions and parties is higher than the country’s education budget. Small- and medium-sized enterprises are closing whilst foreign investors are told to lie on their possible investments. According to Bloomberg, the crisis is near; according to Goldman Sachs, things are okay.
Hong Kong (AsiaNews) – Consumer prices rose at 4.2 per cent last month compared with the same month last year, China’s National Bureau of Statistics (NBS) said today, the lowest in 14 months. However, no one in the country gives much credence to the figure because people have seen prices surge, up to 30 per cent in some cases, rising much faster than official figures. In addition, fears are growing that China’s economy is edging ever closer to a hard landing.
Inflation increased by at 4.2 per cent in November from a year before, the National Bureau of Statistics against 5.5 per cent in October, after hitting a three-year high in July of 6.5 per cent. However, things are worse on the ground. “In fact, inflation is skyrocketing,” a businessman from China’s coast said. “Before, with 50 yuan three people could eat at a restaurant; now, it is not enough for one.”
Other indicators throw a different light on official figures. Meat jumped 36 per cent. Until two months ago, half a kilo of garlic cost two yuan. Now it takes half a yuan just to buy a single clove (when it is available). Now many working families cannot get to the end of the month.
But whilst ordinary people complain about extreme poverty, provincial and national authorities are spending lavishly on dinners, receptions, parties, etc, whose total cost is now higher than the country’s education budget.
Inflation has also risen because of the government’s attempt to shield the economy from the aftershocks of the 2008 subprime crisis. At the time, the authorities introduced a US$ 4 trillion stimulus package that led to runaway inflation caused by overproduction and excess investments. The result has been a real estate bubble with many new but empty houses and unused office space (at least 50 per cent), as well as factories with a lot of unsold inventories. Likewise, provinces have invested heavily in infrastructure, building high-speed railways, airports and port facilities that are underutilised or too far from markets.
Given the situation, the central government has cut lending. However, that and lower exports due to the world economic crisis have been hard on many companies, especially small- and medium-sized enterprises (SMEs). In October, one fifth of Zhejiang’s 360,000 SMEs had to close for lack of credit.
At the same time, it order to maintain an appearance of growth, highly indebted provincial governments have told foreign investors to declare the amount of new capital they intend to invest, which is then classified as “new investments”.
Recently, Prof Larry Lang said that China was on the brink of collapse (see “As China’s govt cheats, its economy is “on the brink of bankruptcy”, Chinese scholar says,” in AsiaNews, 30 November 2011).
Similarly, 61 per cent of investors surveyed said they anticipate a crash in the financial industry in the next five years, Bloomberg reported, eroding confidence in the country’s leadership.
Enthusiasm for Chinese stocks has also flagged among Bloomberg subscribers. In the latest poll, 21 per cent called China one of the best places to invest over the next year. That was less than half the 44 per cent who named China in an October 2009 survey.
The scepticism contrasts with the outlook of economists from Goldman Sachs and the International Monetary Fund, who predict China will avoid a growth slump whilst defusing inflation. Goldman, in a 1 December report, projected the nation's gross domestic product would rise 8.6 per cent next year and 8.7 per cent in 2013.
Inflation increased by at 4.2 per cent in November from a year before, the National Bureau of Statistics against 5.5 per cent in October, after hitting a three-year high in July of 6.5 per cent. However, things are worse on the ground. “In fact, inflation is skyrocketing,” a businessman from China’s coast said. “Before, with 50 yuan three people could eat at a restaurant; now, it is not enough for one.”
Other indicators throw a different light on official figures. Meat jumped 36 per cent. Until two months ago, half a kilo of garlic cost two yuan. Now it takes half a yuan just to buy a single clove (when it is available). Now many working families cannot get to the end of the month.
But whilst ordinary people complain about extreme poverty, provincial and national authorities are spending lavishly on dinners, receptions, parties, etc, whose total cost is now higher than the country’s education budget.
Inflation has also risen because of the government’s attempt to shield the economy from the aftershocks of the 2008 subprime crisis. At the time, the authorities introduced a US$ 4 trillion stimulus package that led to runaway inflation caused by overproduction and excess investments. The result has been a real estate bubble with many new but empty houses and unused office space (at least 50 per cent), as well as factories with a lot of unsold inventories. Likewise, provinces have invested heavily in infrastructure, building high-speed railways, airports and port facilities that are underutilised or too far from markets.
Given the situation, the central government has cut lending. However, that and lower exports due to the world economic crisis have been hard on many companies, especially small- and medium-sized enterprises (SMEs). In October, one fifth of Zhejiang’s 360,000 SMEs had to close for lack of credit.
At the same time, it order to maintain an appearance of growth, highly indebted provincial governments have told foreign investors to declare the amount of new capital they intend to invest, which is then classified as “new investments”.
Recently, Prof Larry Lang said that China was on the brink of collapse (see “As China’s govt cheats, its economy is “on the brink of bankruptcy”, Chinese scholar says,” in AsiaNews, 30 November 2011).
Similarly, 61 per cent of investors surveyed said they anticipate a crash in the financial industry in the next five years, Bloomberg reported, eroding confidence in the country’s leadership.
Enthusiasm for Chinese stocks has also flagged among Bloomberg subscribers. In the latest poll, 21 per cent called China one of the best places to invest over the next year. That was less than half the 44 per cent who named China in an October 2009 survey.
The scepticism contrasts with the outlook of economists from Goldman Sachs and the International Monetary Fund, who predict China will avoid a growth slump whilst defusing inflation. Goldman, in a 1 December report, projected the nation's gross domestic product would rise 8.6 per cent next year and 8.7 per cent in 2013.
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See also
Lower demand drives up unemployment
14/12/2022 15:51
14/12/2022 15:51
