Economists and Danger: Welcome to Modern China

I do not typically write about individual news articles but I saw an article by the always excellent Lingling Wei (who in case you forgot also broke that the IMF was pushing the PBOC for more information about its derivatives portfolio) about Chinese authorities warning economists.  There are a couple of points worth mentioning and some of them are, warning you in advance are politically incorrect.

  1. Any China bull or anyone who still has any remote belief that Chinese data is anything other than art: you’re just embarrassing yourself. Assume the Chinese economy really is in good shape and economists are just misinterpreting data, why do you need to go around threatening people?  One thing that I get from certain non-Chinese economists (with one senior person at well known institution telling me “we have no reason to believe Chinese data is systematically manipulated”) is that I just don’t understand China or Chinese data.  It is widely accepted in China that Chinese data is heavily manipulated.  This is not some dastardly foreign plot but accepted wisdom in China.  I learned about this, as I have said many times, not from academic work but from my students who thought I was moron for believing it in the first place. If China known to censor the news do you really think they are choir boys on economic data and that the economy is humming along at 6.7%?
  2. Self censoring of economic and financial reporting in business community is wide spread. I was told point blank by a senior executive from a major financial institution that they no longer publish any report that is remotely critical of the Chinese economy or markets.  Of course this is not put in the employee handbook but that is unofficial policy.  We already know this is happening to Chinese reporters but his is increasingly happening to economists. To argue that Chinese doesn’t censor economic data is simply delusional.
  3. Politically incorrect warning (but something that should come as no surprise): I am personally only able to say what I say because I am white and American. Consider the race card played. If you have been following China at all, this should come as absolutely no revelation even if it is maybe somewhat politically incorrect to say straight up. Most all Chinese economists do not want to talk publicly about the economy, even those that are pro-Beijing for fear of saying something that will get them into trouble. In today’s China I cannot tell you how much respect I have for a Chinese economist who says anything publicly and even more so for those who do not perfectly conform to what Beijing says.  I know an economist, decidedly pro-Beijing, who gave an interview to local media but laughed when his comments aired as he mentioned they removed his suggestions and comments about how to reform. Mind you this was not a critical voice. This was in fact a very pro-Beijing voice but even he saw the irony.  I have never been approached to stop writing or saying what I am seeing in the Chinese economy, but if I was Chinese by passport or ethnically, I believe there is no chance I would be allowed to write what I write.
  4. The change in China has honestly given me pause to reconsider my own position for fear I might face retaliation in China. Despite my critiques of the Chinese economy and data on largely technical issues, I can say with hesitation I enjoy what I do, my job at Peking University, and the city of Shenzhen. My family enjoys living in Shenzhen, a very comfortable and pleasant city except for the stifling humidity, and my incredibly white kids speak native quality Chinese which has won me many a bet.  However, the entire environment in China is changing and changing rapidly and not just the economy.
  5. Some absolutely great comments by economists who realize how absurd the system is internally. Some of my favorites:
    1. “You can see they’re not happy when you tried to tell them foreign speculators are not your biggest problem,” said one of the officials who attended the meetings.
    2. “As a Chinese reporter, you can do anything but journalism these days,” said a senior editor at a state-owned media outlet.
    3. “I was told by regulators not to recommend shorting the renminbi,” Ms. Lin told the gathering, “so I’m just going to recommend buying the dollar.”
    4. the city’s propaganda department recently instructed a local think tank to stop researching a planned debt-for-equity swap program aimed at helping big state companies reduce debt, according to economists familiar with the matter. The reason, these economists said, is that officials don’t want the research to turn up unfavorable evidence after Premier Li Keqiang and others have endorsed the swaps.
    5. Despite recent signs of a rebound, Gao Shanwen, chief economist at brokerage Essence Securities Co., told investors that “a lot of the official data aren’t reliable” and the economy still faces “big problems,” according to people who attended the closed-door event. Words of those remarks crackled across social media. Two days later, Mr. Gao issued a clarification on his public account in the popular Chinese messaging app, WeChat, saying those remarks were “made up.” He then released a report on the economy shorn of critical commentary. Mr. Gao and representatives at his firm didn’t return requests for comment.

5 thoughts on “Economists and Danger: Welcome to Modern China

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  2. Some defense of China from another white male 😉 The U.S. has (for now) all the leverage, both as the master of world finances through SWIFT, the FED, and a military that heavily patrols the South China Seas. That means whenever any country falters, the U.S. can use that leverage to take advantage (and has, starting with the British right after WW2!). In a sense, China is at economic war with the U.S., or at least has to be very careful or it will be taken advantage of. Therefore, economists in China are soldiers for the Chinese economy. With politicians like Charles Schumer and Trump, the Chinese can’t be expected to trust the U.S. to not put its people ahead of the Chinese.

    If, for the sake of argument, Chinese economists were able to speak freely could we be sure they would give a true unbiased view? Wouldn’t many of them get swayed by Western ideas?

    Getting at the crux of it, can we compare the GDP of a country with the World currency against a country without it? I don’t think we can. Therefore, it becomes a political issue.

    Finally, America censors too, though its subjects and methods are more insidious. For example, you can’t talk about genetic factors in IQ in the U.S. You can’t call the U.S. military baby killers (with their cruise missiles) when, taking all the PC stuff out, they are. The Doctors w/o border hospital episode? You can’t ask that some military commanders go to jail which is exactly what the U.S. would clamor for if it was the Chinese military. Or the sub-prime fiasco? What can anyone do?

    The U.S. is supposed to be a free country, but if you don’t have $100 to pay the government you wait on lines at the airport. I’m not trying to bad-mouth the U.S., only put Chinese policy in context. Like you said, they don’t censor you. That’s because you’re not on their team. Yet they still allow you to work there so they seem as free to me, as the U.S. Indeed, how long would a Chinese intellectual last at Harvard if he wrote about the issues above?

    • “Finally, America censors too, though its subjects and methods are more insidious. For example, you can’t talk about genetic factors in IQ in the U.S. You can’t call the U.S. military baby killers (with their cruise missiles) when, taking all the PC stuff out, they are. The Doctors w/o border hospital episode? You can’t ask that some military commanders go to jail which is exactly what the U.S. would clamor for if it was the Chinese military. Or the sub-prime fiasco? What can anyone do?”

      You can talk about genetic factors in IQ, although recent PC mobs at universities are getting a bit out of hand – and indeed ideas of micro-agression and PC committees are nuts. All the other things in your paragraph are asked by many people, and there have been numerous academic, populist, and media reactions against all of them. So you are just lying / unaware when you claim that people “can’t” do these things. There have also been legal cases compensation etc paid for things like Subprime – even if most still feel more can be done.

      Also I must fault you on your logic. I know it was popular in the Cold War for Soviet Propaganda to always say “what about” in order to try and deflect criticism (known as “whataboutisms”), but the logic is as fallible here as it was there. The article is about China. If you believe that the US is the gold standard for every country to aspire to (which I assume you don’t), then bringing in a comparison to the US may be interesting, but it has no bearing on the arguments made about CHINA. Why not bring in a comparison with Norway, or Sweden, or New Zealand? Why always the US? It is sad that so many people are so obsessed with the US. There are a lot of other countries in the world that may have something interesting too. Still, I suppose that is the way of covetous people – obsessed with the object of their desires.

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  4. Your blog is safe as long as you write in English for a foreign audience. Peking Duck may beg to differ, however.

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