I think many of them are innumerate(right term? people who can't do math). $6000 going into $7000 is a much greater rate of change then $40000 going into $45000. Acceleration is easy. Sustained Acceleration is hard.

I vaguely remember a debate about Katrina and it's effect on GDP.

Some one said that if we saw a 4.5 to 5% growth rate in the first quarter of 2006, it would be strong evidence that catastrophies unleashed more wealth than they destroyed.

Who was that guy?

This post made me go back and read the China post of last weekend (re: how they will not get to 50% of US PcGDP by 2050)

Interesting stuff.

It appears that for China to remain competitive, they will soon have to implement a "One Grandparent" policy, which, for them, won't be very difficult.

The more they 'fix', the higher their PcGDP climbs, BTW.

For comparison, in 2005 Mexico's per capita GDP, in purchasing power parity, (which is the same treatment given to the Chinese figure in the main post), was $ 10,000.

Two points about China's nominal and purported GDP:

That $ 6,000 figure is purchasing power parity. While that model gives us useful insight into how other societies' standards of living stack up against the world's richest nations, it's also not a figure that can be used to estimate a given society's power or influence outside of their borders. Purchasing power parity is a subjective measure.

For instance, in terms of currency exchange, China's 2005 per capita GDP, expressed in US dollars, was about $ 1,200.

In other words, each American's aggregate share of the U.S. economy would allow them to live a lifestyle seven times greater, in America, than each Chinese person's share of their economy would allow them to live, in China.
However, should each of them decide to use those resources to visit London, the American's lot would go thirty-five times further than the Chinese person's would.

Another important point is that while we're pretty sure that the Chinese economy is growing, it's really hard to say exactly how quickly, or what the real GDP numbers are.
The PRC lies. A lot.

Casting A Cold Eye On China's GDP Numbers
Richard C. Morais, 11.14.03
Forbes

For the last 30 years, Sinologist [Thomas Rawski, professor of economics at the University of Pittsburgh] has trawled secondary sources--everything from airline occupancy rates to little-read Chinese statistical trade journals--to verify or debunk official government claims about the Chinese economy. It's an imperfect art, he admits, judgments based on instinct and "built on fragments."

[In 2001], however, this mild-mannered professor made headlines around the world when he presented his case that the Chinese government had systematically falsified its gross domestic product data to hide an economic downturn that took place in 1998 and 1999. The government view, widely taken at face value, is that China has experienced uninterrupted growth since the late 1970s. By Rawski's reckoning, however, China's economy at best grew less than half the official GDP average of 7.6% between 1998 and 2001, and possibly even contracted during the crucial years of 1998 and 1999. [...]

"There is no question that falsification of economic data at the local and provincial level is widespread. We know this because in 1999 the National Bureau of Statistics, on the front page of a national daily, said the provincial statistics were 'cooked' [by local officials]. That was the term they used." [...]

Rawski says he sees a clouded picture going forward: a genuinely dynamic economy threatened by seriously "unpleasant elements." China's banking sector is already a well-known danger zone; Chinese economists and technocrats are themselves writing that a "financial crisis"--their term--is possible. Of course, officially, the Chinese authorities will only admit to nonperforming loans of 30% at the leading state banks. Rawski says a little-known statistic ("rate of interest recovery") suggests that "50% is a better jumping-off point."

Jake van der Kamp
October 24, 2005
Simon World (original article includes illustrative charts)

When the National Bureau of Statistics in Beijing occasionally admits that the figures it publishes are not entirely reliable, I know exactly what it means. We had another case of it last week with the release of third-quarter provisional statistics for gross domestic product. Strong investment and robust private consumption pushed economic growth to 9.4 per cent in the quarter, said the bureau. Oh yeah?

Let us take a closer look at this. [...] For the year to September 30, the mainland's economy registered an output of slightly less than 15 trillion yuan. Now we turn to the components of GDP. The biggest by far is fixed asset investment and firm figures for this were also published last week. Fixed asset investment for the year to September was 8.2 trillion yuan, 24.5 per cent greater than the previous year and the equivalent of 54.8 per cent of total GDP. These are huge numbers, incidentally. It may be possible to find another country with fixed asset investment of more than half of GDP but I cannot think of any. For contrast try Britain at only 16 per cent or the United States at 19 per cent. In Hong Kong the figure is 21 per cent. Let us take the fixed asset investment figure out of the mainland's GDP, however, to see what is left. [...]

[I]n the year to September the man on the street spent 17 per cent less on daily necessities and toys than he did the previous year. But this is not what other official statistics say. They say that retail spending for the year to September was 13.6 per cent greater than it was the previous year and that this retail spending alone was almost twice as great as [...] all personal consumption spending. How is it possible?

It is not. The latest GDP figures from the mainland simply do not add up. I hesitate to use the word "rubbish" to describe them but I am starved of a better one. I think the enormous discrepancy most likely results from an overstatement of fixed asset investment. Capital spending probably is much less than the National Bureau of Statistics says it is. This would imply something else again, however. It would suggest that a vast amount of money earmarked for capital projects was embezzled by corrupt officials and used instead for personal spending on luxury services and toys.

I shall not suggest that this surprises you. Every second anecdote from the mainland tells you it happens every day. All I have done is put some possible numbers to the scale of it, a very big scale indeed.

Posted by: Michael Herdegen at April 26, 2006 6:19 AM

As Orrin's tag line suggests, it is depressing to think of how many beautiful people in the States and the rest of the West will receive this as bad news.

"There is no question that falsification of economic data at the local and provincial level is widespread. We know this because in 1999 the National Bureau of Statistics, on the front page of a national daily, said the provincial statistics were 'cooked' [by local officials]. That was the term they used." [...]

Huh. They're COMMIES: lying is part of the gig, and accepting their lying as truth is what is required to be one of the Faithful.

This type of reporting appears to cyclical. Back in the 1980's there were all the "woe is US" stories on how Japan and Germany were going to bury us economically. Yet it didn't happen. If they were so wrong then, why should I believe them now?

Some parts of the Beltway-media culture I just don't get.

The great problem with the current bout of "China fever" is that it's a symptom of too many things that are misleading and ultimately irrelevant.

For those Americans and Europeans who hate America and American capitalism, a rising China is their next great hope for the decline of the United States.

For those self-hating Westerners who think their own heritage is primitive and dripping with blood, China's rising prestige appears to vindicate their choice to pledge allegiance to the millenia-old culture of China.

For those Asians who are energized by the prospects of China's growing military power, pride in China's growing military power is the latest manifestation of a widespread racist belief in Asian superiority over Western decadence.

The problem is, all those powerful emotional beliefs obstruct rational thinking. Just as couples in love see only the good in each other, those who have "China fever" choose to see only the good in China's economy. Hope and enthusiasm come to hinder true perception and understanding.

If we were to just regard China as a major corporation on the stock market, we would find many disturbing signs.

First, China's economy does have many real assets. But it also has many equally real liabilities. Second, it has a top management that is arrogant, corrupt, stupid, and greedy, placing its own good and survival above everything else. Third, China's financial system is unreliable, with too many assess that are overvalued and many that possibly don't exist. Fourth, too much of its growth has been driven by the willingness of people to invest in it blindly. As long as they do, the stock price will hold. Once they pull out, the price will inevitably nosedive.

Can anyone think of a prominent American company with many of the same traits? Can anyone think of an American corporation that had very real assets but also massive liabilities, that had top executives who were lionized by the press but who turned out to be either idiots or thieves, that cooked the books, and that benefited enormously from having a public and investors who were too impressed with lies and myths about the so-called business genuises who ran the company?

I can. It was called Enron.

My apologies. One correction.

"Just as couples in love see only the good in each other, those who have 'China fever' choose to see only the good in China's economy." should actually read "Just as couples in love see only the good in each other, those who have 'China fever' choose to see only what they perceive is good in China's economy."

x, Good to see you again. Nice post.

No doubt Andy Grove and Bill Gates are "declinists" about their own companies. Their paranoia and obsession about meeting challenges is why their companies are successful and renew themselves.

Declinists are an asset, not a liability, to American greatness. Saying that, yes, it's true that panic and despair do not help, and any analysis and solutions should err on prudence.

The worst economy since Herbert Hoover roll on!

jdkelly, thank you.

Chris, a very good point about how fear and panic can inspire a company to excel and to come up with better products and service. This is the genuis of economic competition, American-style.

Unfortunately, when dictatorships are frightened and panicked, they usually aren't compelled to offer better government and more freedom. Instead, they tend to seek out and destroy political enemies, sometimes real and very often imaginary. This is the curse of political dictatorship, Chinese-style.

X - good to hear from you.

Isn't a big part of the 'risk' in China based on the disconnected nature of control in the economy; i.e., that various oligarchs (PRC generals, local strongmen, etc.) have set themselves up as the final authorities in their spheres, and that Beijing tolerates the situation as long as political sensitivities aren't crossed?

I know that makes China sound more like Russia, which doesn't feel right today, but with the rise in oil prices, Russia is swimming in money right now (although their overall future is quite bleak, with the potential halving of their population in the next 50 years).

Jim, thank you too.

As soon as I have the time, I will be happy to post my response to your question.