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China's economic data are (still) not credible

By Derek Scissors - posted Monday, 23 January 2012

China's macroeconomic and data issues present varying challenges to the U.S. First, the U.S. should stop relying on numbers deemed absurd by the most senior officials of the government producing them. Second, it is possible that Chinese rebalancing may actually begin in 2012-if more by default than by some dramatic central government program.

The U.S. should therefore:

Create a project, led by the Department of Commerce, to compile American estimates of important Chinese economic indicators: GDP, unemployment, inflation, investment, consumption, and so on. This project is long overdue.
During Vice President Xi Jinping's anticipated February visit and the spring Strategic and Economic Dialogue, encourage the Chinese government not to fight rebalancing.

The U.S. Can Help

One way the U.S. could facilitate Chinese rebalancing is by its own rebalancing -- cutting the budget deficit. Apparently this is too much to ask, so the U.S. can publicly tie progress in Chinese rebalancing to an American commitment to forgo trade sanctions for a given period. This would be especially helpful in the politically dangerous year ahead.