China is having an economic slowdown but gauging how severe it may be isn’t easy for the many businesses and executives worldwide who are concerned to determine.
China is the second-largest economy in the world and Chinese government data show that China has reached its lowest level in the last 30 years. But it could be worse.
Leland Miller, who is the CEO of an advisory firm called China Beige Book says that the GDP numbers published by China is just a bunch of garbage because the numbers are believed to be unreliable all the way around.
Knowing the true status of China’s economy is important to many businesses and investors who are making decisions for investments and whether they should expand their businesses to meet future demands.
Some analysts believe that the data which is reported by China’s National Bureau of Statistics (NBS) regarding its economy is unreliable and that the NBS
is only reporting figures to make the government look good rather than reporting accurate figures.
China Beige Book’s chief economist, Derek Scissors, says that the statistics of China’s economy size doesn’t match that of the average income the Chinese workers are making. Also China is dealing with controlling risky lending practices as well as its trade war with the US.
Chinese consumer’s spending behavior is also a key focus on determining the state of China’s economy. They’re just not buying cars or making retail purchases the way they have done in the last decade.
For instance, consumers will spend on what’s necessary, like eating, clothing, housing and commuting, but when the economy slows, they stop spending on the extras like gym memberships for instance. Keeping fit is secondary at this point. A gym owner, Zhou Chang says that many gyms have closed or gone bankrupt.
The Chinese government of course is saying fears over the economic slowdown are being blown out of proportion.
China’s Vice President, Wang Qishan, while attending the World Economic Forum in Davos, Switzerland, in January is urging investors to remain calm. “There will be a lot of uncertainties in 2019, but something that is certain is that China’s growth will continue and will be sustainable,” he said.
However, Chinese business owners are having difficulty in obtaining financing and some have done so through shadow financing or merging their business with government owned companies.
One business owner in the northern province of Jilin says that private businesses are going through a long winter.