China
Volts Don’t Lie? An Alternative Approach to Calculating China’s Growth
By Tom Orlik China’s Vice Premier Li Keqiang said in 2007 that the GDP data for the world’s second largest economy was ‘man made’ and not to be trusted. Instead, the then Party Secretary of Liaoning Province said, he relied on electricity production, train freight and bank loan data as a guide to the state of the economy. Last month, CRT looked at the strengths and weaknesses of China’s GDP data, concluding that the government’s methods for calculating the size of the world’s second-largest economy had improved but still left something to be desired . Are electricity statistics a better guide to growth? Electricity output has a special place in the world of China’s economic data. Officials might lie, it is believed, but volts do not. Ever since economists cried foul on the 1998 GDP data, citing the difference between falling growth in production of electricity and stable growth in GDP, the markets have viewed the electricity data as a proxy for overall growth. That makes some sense. The manufacturing and industrial sectors are major consumers of electricity; changes in output should be reflected in changes in electricity production. Over the last several years, growth in electricity output has moved more or less in line with growth in industrial output. With some of China’s main growth indicators putting in a dismal performance in the last few months, and concerns about a hard landing for the economy, the electricity data provides an optimistic counterpoint. Following a weak April and May, electricity output was up 16.2% year-on-year in June, suggesting a strengthening economy. That contrasts with a weak reading from the preliminary HSBC PMI report in July, which suggested contraction is on the cards. But before breaking out the celebratory baijiu and heading out for karaoke, China’s economic policy makers should consider a few shortcomings of the electricity output data as a guide to growth: – Changes in the structure of the economy change the relationship between growth and electricity consumption. For example, a shrinking role for manufacturing and a larger role for services – something China’s economic planners have been pushing lately — reduces growth in electricity production but not necessarily growth in GDP. And even with no change in the structure of industry, many manufacturers have off-grid generators that they can switch on or off without affecting electricity production data – which only captures on-grid activity. – China’s electricity producers have their own problems. Hydropower accounts for 16% of China’s electricity output. Droughts in April and May meant generators ran into difficulties. Heavy rain has now brought them whirring back to life. Neither the drought nor the flood said much about the underlying strength of demand for electricity. Changes in costs for coal – the main input into electricity generation – can also play havoc with production. – Households account for 12% of electricity consumption and their demand is affected mainly by the weather – which determines whether central heating and air conditioners are on or off – with little relation to changes in growth. All of these factors mean the relation between electricity production and economic growth is difficult to predict. Investors who pay too much attention to electricity as a proxy for growth can misread the signs. This was the case in the first half of 2009, when growth in electricity output stayed in negative territory till May – partly because of a slow recovery in the electricity intensive aluminum sector, but the rebound in the rest of the economy was strong. In the second half of 2011, optimism about the outlook based on June’s strong electricity data may be similarly misplaced. Tom Orlik’s new book Understanding China’s Economic Indicators was released July 12
By Tom Orlik China’s Vice Premier Li Keqiang said in 2007 that the GDP data for the world’s second largest economy was ‘man made’ and not to be trusted. Instead, the then Party Secretary of Liaoning Province said, he relied on electricity production, train freight and bank loan data as a guide to the state of the economy. Last month, CRT looked at the strengths and weaknesses of China’s GDP data, concluding that the government’s methods for calculating the size of the world’s second-largest economy had improved but still left something to be desired . Are electricity statistics a better guide to growth? Electricity output has a special place in the world of China’s economic data. Officials might lie, it is believed, but volts do not. Ever since economists cried foul on the 1998 GDP data, citing the difference between falling growth in production of electricity and stable growth in GDP, the markets have viewed the electricity data as a proxy for overall growth. That makes some sense. The manufacturing and industrial sectors are major consumers of electricity; changes in output should be reflected in changes in electricity production. Over the last several years, growth in electricity output has moved more or less in line with growth in industrial output. With some of China’s main growth indicators putting in a dismal performance in the last few months, and concerns about a hard landing for the economy, the electricity data provides an optimistic counterpoint. Following a weak April and May, electricity output was up 16.2% year-on-year in June, suggesting a strengthening economy. That contrasts with a weak reading from the preliminary HSBC PMI report in July, which suggested contraction is on the cards. But before breaking out the celebratory baijiu and heading out for karaoke, China’s economic policy makers should consider a few shortcomings of the electricity output data as a guide to growth: – Changes in the structure of the economy change the relationship between growth and electricity consumption. For example, a shrinking role for manufacturing and a larger role for services – something China’s economic planners have been pushing lately — reduces growth in electricity production but not necessarily growth in GDP. And even with no change in the structure of industry, many manufacturers have off-grid generators that they can switch on or off without affecting electricity production data – which only captures on-grid activity. – China’s electricity producers have their own problems. Hydropower accounts for 16% of China’s electricity output. Droughts in April and May meant generators ran into difficulties. Heavy rain has now brought them whirring back to life. Neither the drought nor the flood said much about the underlying strength of demand for electricity. Changes in costs for coal – the main input into electricity generation – can also play havoc with production. – Households account for 12% of electricity consumption and their demand is affected mainly by the weather – which determines whether central heating and air conditioners are on or off – with little relation to changes in growth. All of these factors mean the relation between electricity production and economic growth is difficult to predict. Investors who pay too much attention to electricity as a proxy for growth can misread the signs. This was the case in the first half of 2009, when growth in electricity output stayed in negative territory till May – partly because of a slow recovery in the electricity intensive aluminum sector, but the rebound in the rest of the economy was strong. In the second half of 2011, optimism about the outlook based on June’s strong electricity data may be similarly misplaced. Tom Orlik’s new book Understanding China’s Economic Indicators was released July 12
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Volts Don’t Lie? An Alternative Approach to Calculating China’s Growth
Business
Gordonstoun Severs Connections with Business Led by Individual Accused of Espionage for China
Gordonstoun school severed ties with Hampton Group over espionage allegations against chairman Yang Tengbo. He denies involvement and claims to be a victim of political tensions between the UK and China.
Allegations Lead to School’s Decision
Gordonstoun School in Moray has cut ties with Hampton Group International after serious allegations surfaced regarding its chairman, Yang Tengbo, who is accused of being a spy for the Chinese government. Known by the alias "H6," Mr. Tengbo was involved in a deal that aimed to establish five new schools in China affiliated with Gordonstoun. However, the recent allegations compelled the school to terminate their agreement.
Public Denial and Legal Action
In response to the spying claims, Mr. Tengbo publicly revealed his identity, asserting that he has committed no wrongdoing. A close associate of Prince Andrew and a former Gordonstoun student himself, Mr. Tengbo has strenuously denied the accusations, stating that he is a target of the escalating tensions between the UK and China. He has claimed that his mistreatment is politically motivated.
Immigration Challenges and Legal Responses
Yang Tengbo, also known as Chris Yang, has faced additional challenges regarding his immigration status in the UK. After losing an appeal against a ban enacted last year, he reiterated his innocence, condemning media speculation while emphasizing his commitment to clear his name. Gordonstoun, on its part, stated its inability to divulge further details due to legal constraints.
Source : Gordonstoun cuts ties with business chaired by man accused of spying for China
Business
China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves
The Chinese government demolished the Rebiya Kadeer Trade Center in Xinjiang, affecting Uyghur culture and commerce, prompting criticism from activists amid concerns over cultural erasure and human rights violations.
Demolition of a Cultural Landmark
The Chinese government recently demolished the Rebiya Kadeer Trade Center in Urumqi, Xinjiang, a vital hub for Uyghur culture and commerce, as reported by VOA. This center, once inhabited by more than 800 predominantly Uyghur-owned businesses, has been deserted since 2009. Authorities forcibly ordered local business owners to vacate the premises before proceeding with the demolition, which took place without any public notice.
Condemnation from Activists
Uyghur rights activists have condemned this demolition, perceiving it as part of China’s broader strategy to undermine Uyghur identity and heritage. The event has sparked heightened international concern regarding China’s policies in Xinjiang, which have been characterized by allegations of mass detentions and cultural suppression, prompting claims of crimes against humanity.
Rebiya Kadeer’s Response
Rebiya Kadeer, the center’s namesake and a notable Uyghur rights advocate, criticized the demolition as a deliberate attempt to erase her legacy. Kadeer, who has been living in exile in the U.S. since her release from imprisonment in 2005, continues to advocate for Uyghur rights. She has expressed that her family members have suffered persecution due to her activism, while the Chinese government has yet to comment on the legal ramifications of the demolition.
Source : China Demolishes Uyghur Business Landmark in Xinjiang – Shia Waves
China
China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program
China’s private pension scheme, previously piloted in 36 cities, will roll out nationwide on December 15, 2024, enabling workers to open tax-deferred accounts. The initiative aims to enhance retirement savings, address aging population challenges, and stimulate financial sector growth.
After a two-year pilot program, China has officially expanded its private pension scheme nationwide. Starting December 15, 2024, workers covered by urban employee basic pension insurance or urban-rural resident basic pension insurance across the country can participate in this supplementary pension scheme. This nationwide rollout represents a significant milestone in China’s efforts to build a comprehensive pension system, addressing the challenges of a rapidly aging population.
On December 12, 2024, the Ministry of Human Resources and Social Security, together with four other departments including the Ministry of Finance, the State Taxation Administration, the Financial Regulatory Administration, and the China Securities Regulatory Commission, announced the nationwide implementation of China’s private pension scheme effective December 15, 2024. The initiative extends eligibility to all workers enrolled in urban employee basic pension insurance or urban-rural resident basic pension insurance.
A notable development is the expansion of tax incentives for private pensions, previously limited to pilot cities, to a national scale. Participants can now enjoy these benefits across China, with government agencies collaborating to ensure seamless implementation and to encourage broad participation through these enhanced incentives.
China first introduced its private pension scheme in November 2022 as a pilot program covering 36 cities and regions, including major hubs like Beijing, Shanghai, Guangzhou, Xi’an, and Chengdu. Under the program, individuals were allowed to open tax-deferred private pension accounts, contributing up to RMB 12,000 (approximately $1,654) annually to invest in a range of retirement products such as bank deposits, mutual funds, commercial pension insurance, and wealth management products.
Read more about China’s private pension pilot program launched two years ago: China Officially Launches New Private Pension Scheme – Who Can Take Part?
The nationwide implementation underscores the Chinese government’s commitment to addressing demographic challenges and promoting economic resilience. By providing tax advantages and expanding access, the scheme aims to incentivize long-term savings and foster greater participation in personal retirement planning.
The reform is expected to catalyze growth in China’s financial and insurance sectors while offering individuals a reliable mechanism to enhance their retirement security.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
Read the rest of the original article.
- Gordonstoun Severs Connections with Business Led by Individual Accused of Espionage for China
- China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves
- China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program
- How a scandal over sanitary pads is shaping feminist activism in China
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