‘Negative growth’: Experts call China’s bluff on its latest economic report

Philip Lenczycki, DCNF

  • China released its gross domestic product report for the first quarter of 2022, showing 4.8%, well below the government’s 5.5% target. 
  • Multiple experts called the reported figure into question and predicted China’s economic woes were only just beginning. 
  • “Nobody ever trusts China’s GDP numbers and they should be less trusted right now than ever,” Dan Harris, an international lawyer with Harris Bricken told the Daily Caller News Foundation on Monday.

It’s very likely China exaggerated its gross domestic product (GDP) figures in its latest economic report, multiple experts told the Daily Caller News Foundation Monday.

“It wouldn’t surprise me a bit if there’s been no growth or negative growth,” Dan Harris, an international lawyer with Harris Bricken and the editor of the China Law Blog, told the DCNF.

Beijing’s report listed 4.8% growth for the first quarter, well below the government’s target of 5.5%. The report reflects the quarterly period which includes both the start of Russia’s invasion of Ukraine in February and the start of the lockdown in Shanghai, which began in late-March.

“They put out a neutral number, which is exaggerated by 50-100 basis points,” Derek Scissors, senior fellow at the American Enterprise Institute, told the DCNF. “Now we have to wait for what they’re willing to announce for Q2.”

“Nobody ever trusts China’s GDP numbers and they should be less trusted right now than ever,” Harris said, referring to the impact of COVID-19 and Russia’s invasion of Ukraine.

China’s economy suffered a blow as a result of international trade sanctions against Russia, Harris told the DCNF. Fearing international backlash, the Chinese Communist Party has quietly told Chinese companies to make sure not to violate international sanctions against Russia, he explained.

“That means China’s trade with Russia has to have declined,” Harris said, reasoning that many Chinese companies will continue to pass on business opportunities with Russia that could transgress international sanctions.

Even if the first quarter GDP was accurate, it still spells trouble for China’s future, according to Thomas Duesterberg, senior fellow at Hudson Institute.

“Many are skeptical of the accuracy of Chinese statistics, especially with regard to growth,” Duesterberg told the DCNF, “but let’s assume that they’re right here. The important news is that even in the numbers that they reported today, there’s a clear slowing in March that’s going to continue into April. I think it portends that there’s almost no way they can meet their growth targets for the year.”

Duesterberg cited the status of China’s major economic engines as reliable indicators of the nation’s current and foreseeable economic conditions.

“In the last 15 years or so, China has had four drivers of growth in the economy,” Duesterberg said. “One, was the real estate sector. Two, was investment in infrastructure, which it often paid for with debt. Three, was growth in consumer spending. And the fourth driver of growth has always been exports.”

“The Chinese economy is in real trouble,” said Duesterberg. “Land sales are down, apartment sales are down, prices of housing are down, companies are going bankrupt. And there’s no end in sight to this.”

Harris pointed to COVID-19 specifically as an intransigent problem for China, believing it will stymie future economic growth.

“Their numbers are going to look terrible next time, because of all that’s going on,” Harris said. “Not only is China’s economy down now due to Ukraine and COVID, but I don’t see it necessarily picking up even when the COVID lockdowns end.”

“We’re getting clients every single day saying they’re not getting product from China,” said Harris. “Look at what’s going on in Shanghai. That, to some extent, is going on elsewhere in China. You’ve got 40% of your population essentially shut down. That’s not good for an economy.”

Factories in Shanghai which produce Tesla and Volkswagen are among those negatively impacted by the city’s lockdown, which has resulted in staff shortages as well as interruptions to deliveries, according to South China Morning Post.

Duesterberg also viewed Beijing’s handling of COVID-19 as a key obstacle to China’s economic viability.

“What’s going on right now in Shanghai and other places is pretty devastating to economic performance, let alone to the lives of the people who live in those places,” Duesterberg said. “It appears that Xi Jinping and the leadership has decided that meeting his goal of zero-COVID is more important than economic growth in the economy.”

Yet it remains unclear whether the current dismal economic conditions have the power to threaten the Chinese Communist Party’s grip on the country, Harris said.

“I think CCP legitimacy is definitely more open to question now than it was two or three months ago,” said Harris, “but I also view the CCP as not all that different from Vladimir Putin, or Kim Jong Un. So, legitimacy is great, but if you can’t have legitimacy, you can still crush, subjugate, and oppress the people to stay in power.”

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