The China government statistical agency just released economic data showing the poorest GDP growth in almost 30 years for China. The problem goes far deeper than recent effects of the US-China trade war or the impact of calamities such as African Swine Fever that have decimated the nation’s pig herds. The underlying far more serious problem is an emerging disaster that few are willing to discuss openly.
Since about 2017 China’s population has begun to feel the real impact of the ill-conceived One Child Policy imposed by the Communist Party in 1979, some 40 years ago. This slow-growing problem, once seen as benefit, is undermining the entire basis of the China Economic Miracle. The question is whether Beijing can make the transition to an ageing population without major social and economic dislocation.
On October 18 the China State Statistics bureau released Third Quarter GDP which came in at 6.0% compared with 6.2% the previous quarter. While there is great skepticism as to how honest the reporting is, the fact the government must announce a slowing growth at all suggests the situation in reality could be far worse.
The true data on China’s economy remain opaque. In December 2018 the Shanghai University of Finance and Economics published its annual transparency survey on the 31 provincial-level regions. The average score was just above 53%. The study concluded, “[Unfortunately,] the general level of transparency in China’s local governments remains poor.”
A more direct indicator of the health of the economy comes from actual trade data. Bloomberg reports that auto sales in China have fallen for the 15th month out of 16 months in September. It’s the “worst slump in a generation”, according to Bloomberg. As well, sales of new homes and apartments in Beijing, Shanghai and other major cities fell dramatically to lows of 2014.
The deeper issue is not the transparency of official economic data. The deeper issue is whether the China Miracle, the remarkable rise from a Third World level backwardness in less than three decades, is entering a structural crisis that will impact not only China’s economy. The recent data on new car sales and new home buying could be an ominous indicator that the China boom years are coming into a drastic slowing with huge consequences not only for China but also for the world.