China’s gross domestic product (GDP) numbers have long been questioned by the international community due to its lack of transparency. Data from recently leaked government internal documents from Dalian city of Liaoning Province reveal a grim picture of China’s economy amid the resurgence of COVID-19 in different regions since July.
While the global economy has declined sharply this year due to the COVID-19 pandemic, and most countries’ economies have had negative growth rates, China has reported a 3.2 percent rise in its GDP (Gross Domestic Product) in the second quarter, compared to the same period last year, according to its National Bureau of Statistics.
However, the leaked documents obtained by The Epoch Times reveal that Dalian city’s economy took a dive in the first half of 2020 and government debt was ten times above the international warning level set by the European Union.
One of the documents titled, “The Completion of Estimated Major Economic Indicators,” issued by the Statistics Bureau of Lushunkou district in Dalian, reflected a much worse situation than the officially published data for the first five months of this year.
On July 24, the Liaoning Provincial Bureau of Statistics issued data, stating that in the first half of 2020, Dalian “achieved a regional GDP of 315.50 billion yuan, a year-on-year decrease of 3.5 percent at comparable price/value.”
In the context of global economic decline caused by COVID-19 and the subsequent lockdowns, Dalian’s reported 3.5 percent GDP decline is relatively mild.
Leaked Reports Expose Dalian’s Double-digit GDP Slump
According to data from the Dalian Bureau of Statistics, Dalian’s GDP in the first half of 2019 reached 367.10 billion yuan ($53 billion). Calculated in absolute terms, then, Dalian’s GDP in the first half of 2020 actually decreased by 8.6 percent, rather than the officially reported “decline of 3.5 percent.”The Dalian municipal government also manipulated GDP data. Dalian’s GDP in 2018 and 2019 were 766.8 billion yuan ($112.1 billion) and 700.17 billion yuan ($102.4 billion) respectively; in absolute terms, last year’s GDP fell by 9.1 percent from the previous year. However, authorities still used the opaque comparable figures to reverse the sharp decline in Dalian’s GDP in 2019 to “6.5 percent year-on-year growth.”
The internal documents obtained by The Epoch Times further confirmed that authorities fudged their data.
Leaked internal reports of the Lushunkou District of Dalian, which is one of its seven districts, in the first half of the year revealed that Dalian’s economy actually experienced a sharp decline—several times more than what was reported in official data.
At present, there are three types of GDP accounting methods in China: production method, income method, and expenditure method. The Chinese regime mainly uses the production method to calculate GDP, while the United States and other international finance organizations use the expenditure method.
Three indicators—total retail sales of consumer goods, fixed asset investment, and import and export trade surplus—are the most important components of GDP accounting in expenditure method, from which the actual changes in Dalian’s GDP can be seen.
The internal report shows that in the first four months of 2020, the absolute number of “social fixed asset investment” decreased by 25.7 percent year-on-year, and the city-wide growth rate was -17 percent. In the first five months of this year, the year-on-year growth rate was -14.3 percent. The city’s growth rate is at -8.9 percent.
“Total retail sales of consumer goods” fell 20.1 percent year-on-year in the first four months, with a citywide decrease of 24.6 percent; in the first five months of this year, there was a year-on-year decrease of 64.2 percent and a citywide decrease of 21.4 percent.
“Commercial housing sales” in the first four months decreased by 53.8 percent year-on-year, and the city’s growth rate dropped 14.8 percent; in the first five months of this year, the year-on-year growth rate was -48.1 percent, and the city’s growth rate was -21.9 percent.
These three elements are similar to the metrics of total retail sales of consumer goods, fixed asset investment, and import and export trade surplus (adverse) in the CCP’s official statistics, which can be used as the main basis for calculating local GDP, and can reflect the real changes in the GDP of Lushunkou district and Dalian city.
In Lushunkou and Dalian, which has little export or import trade, the two major indicators that have the greatest impact on the GDP are “social investment in fixed assets” and “total retail sales of consumer goods,” that have both fallen below nearly 20 percent in the first four months of this year.
The “total retail sales of consumer goods,” which has the greatest impact on GDP, has continued to decline, even falling below 60 percent in Lushunkou. In contrast, the Chinese Communist Party (CCP) claims that consumption has contributed as much as 60 to 80 percent of China’s GDP in the past three years.
Dalian’s “commercial housing sales” and “total retail sales of consumer goods” showed an accelerated decline—the decline widened from 14.8 percent in the first four months to 21.9 percent in the first five months. These two indicators reflect the current drop in consumption in China.
To sum up, the double-digit decline in economic indicators disclosed in the internal report reveals the truth about Dalian’s economy this year: not only has its GDP plummeted, but its economic situation is still deteriorating.
Lushunkou District’s Debt Ratio Is Alarming
In April this year, China’s Ministry of Finance reported that as of the end of 2019, the local government debt ratio was about 82.9 percent, which was lower than the internationally accepted standard of 100 to 120 percent, and lower than the 60 percent warning line put out by the EU.However, a leaked government document shows a much grimmer picture of government debts.
The real numbers are disclosed in Lushunkou’s “Report on Work to Prevent and Resolve Government Debt Risks,” submitted to the Dalian municipal government: “As of the end of June 2020, the total debt balance of Lushunkou was 27.68 billion yuan, including the 13.292 billion government debt and the 14.388 billion hidden debt.” “Our district debt ratio is 736.30 percent, and the hidden debt risk level is red,” it noted.
The district government has actually gone bankrupt, as China current affairs commentator Li Linyi said, after analyzing the data shown on the internal report.
Despite the huge debt, Dalian is seemingly operating normally. The leaked documents also disclosed how the local government plans on repaying the huge debt.
The district government stated in the report that in 2020, it needs to repay 3.48 billion yuan debt; however, it only has “100 million yuan in budget “ to pay for it. The Lushunkou district government listed many tactics to find money to pay the remaining 3.38 billion yuan debt, including ”withdrawing money” from the banking industry and land financing—“make full use of idle land” and “taking land to finance through the newly formed State Development & Investment Corporation,” the document stated.
The Lushunkou district government also disclosed in the document that the report was issued in compliance with instructions from the Dalian Municipal Finance Bureau, in order to assess the risk level of the local government’s hidden debt.
Li believes that this means that the higher-level CCP authorities are fully aware of the government debt risks, knowing that they could capsize at any time. Thus, they are trying to find out the real internal numbers. This also confirms that the CCP’s debt crisis is far beyond the outside world’s imagination and has already exceeded the critical line of a financial crisis, he added.
The resurgence of the COVID-19 outbreak since July has caused several areas in Dalian to be locked down again. Residential communities in Dalian were continuously sealed off by authorities. Many residents became unemployed and economic production came to a halt. Li pointed out that the CCP’s lockdown measures have worsened Dalian’s economic decline.
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