The Financial Times today publishes a podcast by Michael Pettis - an author belonging to the 'China will have a drastic slowdown' school who the FT has published before. Pettis is cited in some media as a 'China expert' - the Carnegie Endowment for International Peace, where he is a Senior Fellow, describes him as 'a noted expert on China’s economy.' Eeaders are therefore likely to encounter Michael Pettis and I have written a short comment on the FT article showing his inaccuracy - as with all the China hard landing school. It is below.
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I very much like the fact that Michael Pettis edited his blog in a very fair and open fashion. But unfortunately his projections for China's economy are serially highly inaccurate. For example his predictions:
11 March 2012: 'I still maintain that average growth in this decade will barely break 3%' - so far this decade China's annual average growth has been 7.7%.
14 August 2009: 'I continue to stand by my comment last year... that the US would be the first major economy out of the crisis and China one of the last' - since 2007 China's total GDP growth has been 106% and the US 12%
These are not detailed errors, which are inevitable, but a fundamentally wrong analysis of China's dynamic and are due to underconsumptionist economic theories in The Great Rebalancing.
For those who want a list of other basically inaccurate predictions on China's economy please see: ' Wrong Analyses of China - Listed by Author and Date' http://www.learningfromchina.net/wrong-analyses-of-china---listed-by-author-and-date.html
To make an obvious point, but one too often neglected, to be an 'expert on China' is not to write many words that are inaccurate about China, it is to write analyses which are accurate about China.
But at least Micheal Pettis edited his blog in way that these errors could be pointed out.
'A train that proclaims China’s global ambition' - strengths and weaknesses of Philip Stephens Financial Times analysis of China's 'One Belt One Road'
Much analysis in the Western media very much underestimates the significance of China's One Belt One Road (B&R). The reason for this is that it is difficult for the West to adjust to a reality whereby the main locomotives of world growth are not in the US or Europe but in Asia and developing in connection with China. Therefore it is worthy of attention that a leading Western journalist, Philip Stephens, chief political commentator of the Financial Times, under the title 'A train that proclaims China’s global ambition', has made an analysis of B&R that cannot in any way be accused of underestimating it. On the contrary Stephens accurately assesses the great impact of B&R. Looking at Stephens article therefore allows an assessment of both the strengths and weaknesses of serious Western analysis of B&R.
The great strength of Stephens analysis, as already noted, is that it in no way underestimates the global impact of B&R. Indeed the subtitle of the article is: 'the Atlantic century makes way for a new Eurasian age.'
Stephens specifically notes the considerable underestimation of B&R in much of the Western media: 'Among this year’s under-reported events was the opening of a new rail freight route. A locomotive, pulling wagons loaded with Chinese manufactures, set out in early January from Yiwu in Zhejiang province. Some 18 days and seven countries later it arrived at a goods depot almost 7,500 miles away on the eastern edge of London.'
If correction of underestimation of B&R in the Western media is the very substantial strength of Stephens article its weakness is underestimation of the economics of B&R, and therefore a resulting tendency to see it in too geopolitical terms - in the worst case, citing Zbigniew Brzezinski, as almost a 'geopolitical conspiracy'. Stephens write: 'The jury is out on the economics of this latest reincarnation of the ancient silk routes. That is beside the point. The journey above all else was a statement of China’s geopolitical intent.'
He notes: 'Zbigniew Brzezinski, the former national security adviser to president Jimmy Carter who until his death this year was Washington’s sharpest strategic thinker, long ago grasped the significance of what he called the “axial supercontinent”. “A power that dominated Eurasia”, he wrote as far back as 1997, “would exercise decisive influence over two of the world’s three most economically productive regions, western Europe and East Asia . . .”... As the US retreats, China makes its presence felt. Quite suddenly, the Eurasian century has a certain ring to it.'
The weakness of Stephens analysis, which gives rise to the implication that B&R is really simply, or overwhelmingly, only about geopolitics is (implicit) underestimation of the economics involved.
The B&R region is now by far the most powerful locomotive not only of the regional but of the global economy.
Measured at current exchange rates projections from IMF data from 2016-2021 shows that in the next five years the B&R region will account for 46% of world economic growth - compared to 24% for North America and 10% for the European Union.
As the average growth rates in countries in the B&R region are much faster than those in either North America or the EU within five years the structure of the world economy will be sharply changed. By 2021 the GDP of the B&R region, calculated from IMF data, will be $29.7 trillion, compared to $21.1 trillion for North America and $18.3 trillion for the EU. In percentage terms the B&R region will be 31.3% of world GDP - compared to 27.3% for North America and 19.2% for the EU.
Philip Stephens article is therefore noteworthy as indicating a Western analysis by a leading journalist in a major Western publication which fully understands the impact of B&R. Further dialogue with Chinese economists will be valuable as they can help correct one-sidedness's which remain.
'US calibrated provocation to China' is the title of a very informative article by China.org.cn columnist Sajjad Malik. It outlines how Trump is 'quietly' but determinedly continuing his anti-China policy. It is worth quote the key passage.
'Donald Trump might have lowered his anti-China rhetoric after the famed meeting with President Xi Jinping in Florida; however, there doesn’t seem to be any deep change in his overall long term policy, including continued American ties with China's Taiwan.
'Trump showed his true intentions by accepting a telephone call of the leader of Taiwan after winning the presidential election last November – a first for any U.S. leader. Last month, he displayed his attachment to the old policy by authorizing fresh arms sale to Taiwan.
'The latest pro-Taiwanese gesture is the enactment of a law to re-establish regular naval portcalls at Kaohsiung or any other suitable island ports. The provision is part of the National Defense Authorization Act for Fiscal Year 2018, passed by the U.S. House of Representatives last week.
'Chinese Foreign Ministry spokesperson Lu Kang said this "seriously violates the one-China policy and the three China-U.S. joint communiqués upheld by the U.S., and infringes on China's domestic affairs."'
Readers are recommended to look at the full article.
'Seven charts that show how the developed world is losing its edge' - a comment on Martin Wolf's analysis
Earlier this week I finished an article "Growth in the G7 'Great Stagnation' Will be Slower than in the Great Depression". It was for my column in Chinese at Sina Finance Opinion Leaders. By coincidence, but probably stimulated by similar developments, Martin Wolf, chief economics commentator of the Financial Times, wrote an article for that newspaper on Wednesday with the self-explanatory title 'Seven charts that show how the developed world is losing its edge'. As we had covered the same subject I wrote a comment on his article which is below.
As this blog has an advantage over comments in the FT that it can show charts the key one in my article is shown first.
I hope people will read my article and, for those with a subscription to the FT, they will also read Martin Wolf's article.
‘Martin as usual put his finger on the big questions. In particular his analysis of the decisive role of China in the 21st century is accurate . But in one key sense he even underestimates the situation of 'stagnation' in the advanced economies. Data shows that growth in the advanced economies will actually be slower than in the Great Depression after 1929. This can be immediately seen in a chart which can be found at '"Growth in the G7 'Great Stagnation' Will Be Slower than in the Great Depression". However as charts cannot be posted here [in FT comments] the data may be summarised in words.
‘After the initial post-1929 economic collapse recovery during the 1930s was rapid and post-crisis growth strong – the US being the most important exception. By a convenient statistical coincidence, 1938 was nine years after 1929, and 2016, the most recent year for current factual data, was nine years after the last pre-international financial crisis year of 2007. Therefore, in comparing 1929-38 with 2007-16 the same length of time is being analysed. By 1938, nine years after the beginning of the Great Depression, G7 output was 8.5% above its 1929 level and in 2016, nine years after 2007, G7 growth was 7.7% above its pre-financial crisis level. By 2016 growth of the Western economies after the international financial crisis was therefore almost as slow as in the Great Depression. But strikingly growth during the recovery period in the Great Depression was much faster than after the international financial crisis, so already by the end of this year overall growth after 2007 will be slower than after 1929 – G7 growth in the 10 years after 1929 was 15.9% and by 2017, 10 years after 2007, it will be 10.6% on IMF projections. This does not contradict Martin's point, merely puts it more starkly.
‘As regards China this point made by Martin is decisive and its implications need to be internalised: by all analysis: 'Nothing better illustrates China’s advance than its huge savings. These are so large, partly because the economy has become so big and partly because Chinese households and businesses save so much. It is likely that Chinese capital, capital markets and financial institutions will become as influential in the world economy in the 21st century, as US capital, capital markets and financial institutions were in the 20th century.'
Prem Shankar Jha is a leading Indian journalist, columnist and former editor of the Hindustan Times, New Delhi. He has published an outstanding analysis of current dangerous China-India disputes, which centre on Bhutan, written from an Indian perspective 'India-China: Differences, disputes and deadlock'. The whole article is a 'must read' but a few excerpts are given here to give the flavour of the analysis.
First it shows it is India, not Bhutan, which has been seeking to create India-China tensions:
'India has close relations with Bhutan, but Bhutan is a sovereign country, which has the right to decide how it will deal with its disputes with other countries. India’s intervention has, in effect taken this right away from Bhutan. A studied silence on this issue from Thimpu suggests that India’s hasty defence of Bhutan is not entirely welcome there. Bhutanese newspapers have reported the stand-off almost entirely in factual terms, without comment. Kuensel, the state-owned newspaper, pointed out that Doklam/Donglang is only one of four territorial disputes China had with Bhutan. Would it be too far fetched to assume that it is hinting to New Delhi that, since it cannot step in to resolve all of them it would do better to leave these to Bhutan?'
Second it shows how India's prime minister Modi has consciously created current India-China tension:
'The turnaround in Sino-Indian relations has been so swift, that it’s left most people in China and India confused. What is beyond doubt is that it was initiated by Mr Modi. The first indication was Modi’s sudden, and well- publicised, replacement in January 2015 of Indian foreign secretary Sujatha Singh by then Indian Ambassador to the USA, S. Jaishankar a day after his first meeting with former US President Barack Obama in Washington, and one day before Jaishankar was due to retire from the Indian Foreign service.'While Modi has never revealed his reasons, two years later, the Indian daily Hindustan Times summed them up, when Foreign Secretary Jaishankar got an unprecedented third extension of service, “ a Prime Minister has found a foreign secretary in tune with his vision and worldview, and his risk-taking appetite… for too long, India has been held back in its engagement with US in particular because of ideological categories which are no longer relevant….”.
'Since then Mr Modi has lost no time in turning China from a friend to a foe. Whatever passed between him and Obama at their first meeting, brought Obama post haste to India to be Modi’s chief guest at its Republic day celebrations on January 26 2015. Obama’s purpose surfaced a day earlier when the two leaders signed the "U.S.-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region".'
Third the article accurately analyses the dangerous situation Modi has created:
'Today Mr Modi is faced with having to do something he has never done before. This is to admit, however tacitly, that he has made a mistake, pull Indian troops back from the Dokalam plateau, and step back. If he does not, then China has made it absolutely clear that it will go to war to evict the Indians from Doklam/Donglang. What is worse the war will be fought on Bhutanese territory over the objections of its leaders and people.
'Hordes of Indian “analysts” who have been asked whether the present confrontation could lead to war have hastened to say ‘no’. That is precisely the wishful thinking that preceded the 1962 China-India war. The truth is that having manoeuvred India into just the impossible position, Beijing would be stupid not to take advantage of it to administer another crushing defeat upon its only rival in Asia.
'Short of giving a formal ultimatum China has left no avenue unused to convey this warning... China’s Ambassador to India, Luo Zhaohui, expressly did not rule out war when questioned persistently by a correspondent, and warned New Delhi:” “The first priority is that the Indian troops unconditionally pull back to the Indian side of the boundary. “That is the precondition for any meaningful dialogue between China and India.”
'A day later, in a moderately worded, but steel-hard editorial Xinhua, the official Chinese news agency, stated that if India did not want a further escalation of the situation in Doklam, it must withdraw its troops to the Indian side of the border.'
But these are only parts of the article. As said at the beginning it is a 'must read' for anyone wanting to understand present India-China relations.
Prem Shankar Jha is author of The Twilight of the Nation State: Globalisation, Chaos and War.
China’s latest 6.9% GDP growth - 'China hard landing' story bites dust for 10,000th time in last 30 years
China's latest economic data was published today (17 July 2017). It showed strong growth on all key indicators. Compared to the same period in the previous year:
But do you remember all those stories in the media last year and since by Western 'China experts' about how China was supposedly going to suffer a 'hard landing'? For example on 5 April 2016 the Wall Street Journal reported:
'At a recent workshop hosted by the Council on Foreign Relations, a nonpartisan U.S. think tank, participants—35 or so academic economists, Wall Street professionals and geopolitical strategists—lined up around three different growth scenarios for China. Only 31% chose the optimistic one, defined as 4% to 6% annual growth, dependent on leaders successfully implementing reforms; 61% foresaw a “lost decade” of 1% to 3% growth; the rest thought a so-called hard-landing, or contraction, was most likely.''
'Of course it wasn’t a scientific survey, but what’s interesting is that apparently nobody considered the possibility that the Chinese government could deliver on its promise of “medium to fast” growth, meaning 6.5% or higher.'
Given China's 6.9% GDP growth over a year later if that was the quality of analysis in the Council on Foreign Relations, one of the US's most august institutions, no wonder US foreign policy makes mistakes.
The reality is, of course, there is an entire genre of 'econo-fiction' in the West which pursues the policy of an economic ostrich - put your head in the sand so you can't see reality. Probably its most notorious example is Gordon Chang's The Coming Collapse of China but thousands of other examples could be chosen.
Serious analysts, who want to have an accurate view of China's and therefore the global economy, and who made such predictions of a China 'hard landing' or 'crash', will honestly admit 'I was wrong' - that is to be respected. Unfortunately experience shows that the 'econo-fantasists' predicting a China hard landing will continue to turn out their misanalysis - not merely making entirely wrong predictions but costing companies who believe it hundreds of millions of dollars.
P.S. to give a flavour of the errors in financial media on China the pictures below show two articles from the Wall Street Journal. The first, from 17 July 2017, reports how China's GDP growth was 6.9% and easily hits its growth target. The second from 5 April 2016 was the one reporting the unanimous opinion of the economists in the US Council on Foreign Relations predicting it was impossible for China to hit its growth targets - and 61% believing China faced a 'lost decade' :-)
Foreign Policy magazine presents itself, and often is, a serious US source of analysis of international relations. However its dogmatic blinkers on China, its failure to face facts, lead it to sometimes publish almost comically inaccurate analyses of China's economy.
A classic case comes in the recent issue in an article entitled 'China’s Seen Globally As Gaining Ground on United States'. This examines a recent Pew international opinion poll asking the question whether the US or China was the world's largest economy.
The correct answer is that it depends how the measurement is made. If it is made in internationally comparable prices, purchasing power parities (PPPs), the IMF and World Bank acknowledge China has overtaken the US to become the world's largest economy (PPPs are generally preferred by Western economic institutions). As developing countries currencies are undervalued in real (that is internationally comparable price) terms if the measure is made at current exchange rates then the US remains the world's largest economy. So both those who claim that China and the US are the world's largest economies have evidence to back their perception!
But what is virtually laughable is that the article, instead of discussing this serious issue, puts forward the following analysis: 'given China’s deep-seated economic woes — rising labor costs; crushing corporate and government debt; woefully inefficient state firms; rampant pollution; a dearth of arable land and clean water; and a shrinking workforce — many experts are a lot more worried about a Chinese slowdown than about Beijing stealing the global economic crown.'
To make a serious comparison of the state of the Chinese and US economies the graph below shows the growth of China and the US since the beginning of the international financial crisis. Since 2007, the last pre-international financial crisis year, the US economy has grown by 12% while China's economy has grown by 106%. Since the international financial crisis began China's economy has grown by almost nine times as much as the US economy. But according to the analysis it Foreign Policy it is the not the US that has 'deep-seated economic woes.' This is an apparent attempt to copy in economics the logic of Alice Through the Looking Glass - the famous book the principle of which is that everything is reversed compared to the real world. If one economy is growing nine times as fast as another supposedly, according to Foreign Policy's analysis, it is the fast growing economy that is in 'deep-seated woes' :-)
As Western 'China experts' who write inaccurate predictions and analysis on China like to have their views forgotten in time for their next pronouncement this site keeps a record on a section 'Wrong Analyses of China - Listed by Author and Date'. The latest analysis in Foreign Policy has duly been added to it.
Liu Xiaobo's views were neo-con, colonialist and semi-racist against China - which is not a reason to welcome his death
The treatment of Liu Xiaobo, who has just died, by the mainstream Western media is a classic example of its hypocrisy and real anti-China motives. Liu Xiaobo was presented by them as a 'hero of human rights'. The reality is his views would have placed him in the West as a neo-con with a twist of racism thrown in.
An excellent analysis of this is given in Barry Sautman and Yan Hairong's article ‘Do supporters of Nobel winner Liu Xiaobo really know what he stands for?’ Readers are strongly recommended to look at the whole article but the following excerpts will give the taste of Li Xiaobo's views:
'in his article Lessons from the Cold War, Liu argues that "The free world led by the US fought almost all regimes that trampled on human rights … The major wars that the US became involved in are all ethically defensible."
'During the 2004 US presidential election, Liu warmly praised George Bush for his war effort against Iraq and condemned Democratic party candidate John Kerry for not sufficiently supporting the US's wars:
[T]he outstanding achievement made by Bush in anti-terrorism absolutely cannot be erased by Kerry's slandering … However much risk must be endured in striking down Saddam Hussein, know that no action would lead to a greater risk. This has been proven by the second world war and September 11! No matter what, the war against Saddam Hussein is just! The decision by President Bush is right!
The unpleasant semi-racist or xenophobic twist was Liu's denigration of China. According to him the Chinese were 'wimpy, spineless, and fucked up':
'Liu has also advocated the total westernisation of China. In a 1988 interview he stated that "to choose westernisation is to choose to be human". He also faulted a television documentary, He Shang, or River Elegy, for not thoroughly criticising Chinese culture and not advocating westernisation enthusiastically enough: "If I were to make this I would show just how wimpy, spineless and fucked-up [weisuo, ruanruo, caodan] the Chinese really are". Liu considered it most unfortunate that his monolingualism bound him in a dialogue with something "very benighted [yumei] and philistine [yongsu]," the Chinese cultural sphere. Harvard researcher Lin Tongqi noted that an early 1990s book by Liu contains "pungent attacks on the Chinese national character".
In line with his Liu Xiaobo thought colonisation could play a good role for China:
'It took Hong Kong 100 years to become what it is. Given the size of China, certainly it would need 300 years of colonisation for it to become like what Hong Kong is today. I even doubt whether 300 years would be enough.'
What would be the reaction in the US to someone who said 'Americans are wimpy, spineless and fucked-up' and supported George W Bush's invasion of Iraq? They would be regarded as a progressive figure? Please tell another a joke.
Liu Xiaobo was supported by forces in the West, and ridiculously given the Nobel Peace Prize, because he was a useful person to spread anti-China propaganda. That is the truth as his views show.
There are few people whose death is to be welcomed (Hitler excluded) and Liu Xiaobo did not come in that category. But that should not hide the truth about his real views or prevent demolition of the ridiculous attempt to present those views as representing 'human rights'.
To many people outside China their lack of knowledge of the Chinese language might seem an insuperable obstacle to following closely intellectual life in China. To be truthful until recently it was - but it is no longer. The advances in internet translation software are now so great that provided something is online you can probably read it. And the more clearly or professionally defined the issue is (for example economics or geopolitics!) normally the easier it is.
When I first started working in China in 2009 internet translation software was so primitive it was almost useless. That has completely changed. To try to show this I will take a practical example simply taken from today.
The 'hottest' article on Guancha.cn, one of China's leading commentary websites, is about the observations of an Indonesian woman on her visit to China. Its Chinese headline is shown below. A correct translation is 'Muslim girl travels in China: China may be the country where it is most easy to live.' The Google translation makes one significant error, translating 'girl' as 'sister' but no one has any difficulty in understanding the general sense.
Here is the Google translation of most of the beginning of the article:
'many foreigners traveling in China, "Vlogger" , they want to experience their own, the real China, show to the world. However, Xiao Bian feel that this is a good opportunity, so there is no chance to personally contact a lot of foreigners in China friends, to understand the foreigners perspective, and different foreigners, in fact what it is like. Today we have to talk about a Muslim sister.
'She is a poet Adriana, from the capital of Indonesia Jakarta, 25 years old, starting from 2013 to quit the $350 monthly work in Indonesia, travel alone, has been to Thailand, Singapore, Malaysia, Vietnam. Earlier this year, she came with about 1,000 US dollars to China, at present, China has become the longest country to stay.
'Why does she seem to have a look and see what the world really looks like and know friends from all over the world.'
There are a few sentences later in the translation which make no sense and the grammar is terrible but there is little difficulty to understand the general point. And because this is a 'personal interest' story it is more difficult to read in translation than articles on subjects such as economics which, because they have a more strictly defined vocabulary, can be much more strictly translated by software.
Naturally for very important matters it is necessary to have a professional interpreter to check. But to follow the overall discussion is no problem. And as China's economic debates, for example, are easily the most advanced in the world it is very worth the effort.
China's internet community is by far the largest in the world - 731 million in December 7016, or two and a half times as many as the US's 286 million. China's internet life is like a whole continent about which the rest of the world still knows far too little - and there is no longer any reason not to.
If foreigners don't follow China's intellectual life now the only reason is because they don't want to, sometimes because they have a quite unjustified intellectual arrogance, not because they can't any more.
PS ''Muslim girl travels in China: China may be the country where it is most easy to live.'
To show a type of article that is popular in China the one on Guancha was so discussed because while Western visitors in China are relatively frequent in big cities, and there are many articles and videos by them in China, a visit by a Muslim woman from Indonesia making a Vlog (video blog) was rarer. The extremely positive headline used by Guancha 'Muslim girl roaming China' and the images Guancha used below (including showing a fantastic collection of hijabs!) speaks for itself.