The Hidden Cost of China’s Statism

October 19, 2022 by Dan Mitchell @ International Liberty

I wrote many years ago that China did not have a “tiger economy.”

Indeed, I subsequently pointed out that China’s growth is not impressive when compared to East Asian nations that did enjoy rapid growth.

My goal was to convince people that the U.S. should not cite China to justify bad ideas such as industrial policy.

But there’s now evidence that I was understating my argument.

Check out this tweet about how the Chinese government has exaggerated the nation’s economic output.

The above tweet comes from a fascinating article in the Economist that analyzes how authoritarian governments can’t be trusted to report accurate economic data.

It turns out that China is one of the worst offenders.

Dictators are often seen as ruthless but effective. Official gdp figures support this view. Since 2002 average reported economic growth in autocracies has been twice as fast as in democracies. But…dictators’ economic stewardship may not be as effective as they claim. New research finds that autocrats greatly overstate their countries’ economic growth. …The data showed that dictators’ reported gdp tended to grow much faster than satellite images of their countries would suggest. …cumulative gdp growth between 2002 and 2021 in countries “not free” is nearly cut in half: from 147% to 76%. …In a related study Jeremy Wallace, a researcher, found misreporting by Chinese provinces, too. As he notes, a leaked American diplomatic cable from 2007 revealed the view of Li Keqiang, the prime minister, then a provincial party secretary. He had said, with a smile, that gdp figures were “for reference only”

Here’s a more detailed version of the above image.

The gray circle near the top right is what the Chinese government is telling the world. The red circle much lower on the graph shows the real performance of the Chinese economy based on satellite data.

This data is bad news for the Chinese people. And it’s an indictment of President Xi, who is pushing China in the wrong direction – toward more statism and more government control.

So I’m not surprised that the geese with the golden eggs are escaping.

But I continue to be amazed that some of the fools in Washington want to copy bad Chinese policy.