Gordon Chang: China in Big Trouble, Could Bring Global Economy Down with It

Monday, May 16, 2016
By Paul Martin

By: Mike Gleason
GoldSeek.com
Monday, 16 May 2016

Mike Gleason: It is my privilege now to welcome in author, lawyer, television pundit, and Forbes columnist Gordon Chang. Gordon is a frequent guest on Fox News, CNBC, and CNN and is one of the foremost experts on the Chinese economy and its geopolitics and has written a book on the subject called The Coming Collapse of China.

Gordon, it’s a real honor to have you on with us today. Thank you very much for taking the time, and welcome.

Gordon Chang: Thank you, and it’s a real honor to be on your podcast.

Mike Gleason: Before we dig into some specifics here, Gordon, China’s economy is now the second largest in the world. They’ve been reporting GDP growth at 7% to 10% per year for decades, and we’ve all heard stories about their booming economy. But few Americans have been there and probably don’t really know what’s going on. The Chinese government is notorious for managing statistics and controlling information, so it can be difficult for U.S. investors to get the real story. That’s why we’re very excited to get your insights today. You’ve spent time in China, you are of Chinese descent, and you’ve been studying their economy for decades, so you have a unique perspective on what is really happening there.

So to start out here, talk about the current state of the Chinese economy as you see it and where it might be headed. As people listening have probably already gathered, based on the title of the book you wrote, you aren’t all that optimistic about what’s going to happen there. Tell us about that as we set the stage here.

Gordon Chang: The official National Bureau of Statistics says that the Chinese economy grew 6.7% in the first quarter of this year, 6.9% in 2015. I think that those numbers are over-statements. So for instance, in Q1 they might have been growing 3% or 4%, but maybe even less than that. In 2015, it was a tragic story because you start looking at some of the indicators, you see the contraction of the important manufacturing sector. You see consumption growing a little bit, but not that much.

And still, the most reliable indicator of Chinese economic activity is the consumption of electricity, and in 2015, electricity consumption grew but only by 0.5%. The country was in deflation in 2015 with nominal GDP at 6.4% and real at 6.9. That’s really difficult to reconcile with an economy growing in the higher single digits. So I think China has got a problem right now because essentially, Chinese leaders no longer have the ability to create growth. This is an economy that’s trying to trend down, and eventually, it will start to contract.

The Rest…HERE

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