China’s Economic Index Takes a Plunge

China’s economic performance has taken a plunge this year, and it’s a sign of the end of China’s four-decade economic cycle, according to China economics expert and author, Gordon Chang. Others are saying the real situation is even worse than what the data shows.

Gordon Chang, author of The Coming Collapse of China, contributed an article to Forbes on Aug. 25, titled, “The End of China’s Four-Decade Economic Cycle,” describing the collapse of China’s economy with detailed data analysis.

For example, Chang said: “Foreign direct investment plunged 17%; imports fell 1.6%; and total social financing, China’s most-inclusive measure of lending, dropped 86.1%. New credit of 273.1 billion, the lowest since October 2008, suggested fundamental weakness throughout the economy.”

According to the Wall Street Journal, “The preliminary HSBC China Manufacturing Purchasing Managers Index fell to 50.3 in August—a three-month low—compared with a final reading of 51.7 in July… That was below the expectations of economists.” The data has dashed many economists’ hopes that China’s economy would finish the year strong after a slow start. “China’s economy faces an uphill battle for the rest of 2014,” the WSJ added.

Yang Bin, a professor at Tsinghua University School of Economics and Management told NTD: “The domestic situation shows an economic crisis on many fronts, such as the stock market drop, inflation, depressed industry, and low consumption capacity.” Bin said it has been like this for two years, only the data has come in late.

Chinese financial think-tank researcher Gong Shengli once made the comment that economic predictions are normally based on transparent data; but in China, predictions based on data can prove troublesome.

In 2008, Beijing flooded the economy with cash to avoid the worst effects of the global downturn. But excessive investment in infrastructure and real estate has resulted in irresolvable waste and misuse of resources.

Chinese authorities claim to only use “micro-stimuli” or “targeted measures,” but according to Chang, behind-the-scenes they are pouring cash into China as fast as possible.

In June, they issued 1.08 trillion yuan in new loans. Total social financing rose 40.7 percent since May, while the amount of money in circulation (M2) rose 14.7 percent since last year. “From all indications, the June loans largely went to state and local government entities,” Chang said.

Yang Bin, the Tsinghua professor, told NTD that bank loans only go to state-owned enterprises, and these companies have become a serious drag on the economy.

Chinese economist, Yang Peichang, stated: “There is just no way to conduct comprehensive reforms in China. Under such a regime, there is little likelihood of any comprehensive reform.”