The Rudd strategy Part II: just how good is China's economy?

Increasing environmental degradation and desertification create a continuous flow of environmental refugees comprising the rural poor forced off the land by expanding desserts plus shortages and contamination of water supplies. Millions found employment in the low paying export manufacturing factories, steel and coal operations, construction, huge infrastructure projects and China's foreign operations.

China's solution to prevent rising unemployment from exporting industry closures is to promote increasing domestic demand to offset the decline in exports and maintain the inflow of foreign exchange.

Official unemployment is unrealistically low 4.5 per cent but relates to the target of more than 9 per cent GDP growth. The statistics however are an exercise in manipulation. The exclusions are extensive and unrealistic. Unemployment only relates to restricted categories in urban areas. Statistics for rural unemployed do not exist.

A recent study indicated urban unemployment was around 15 per cent. Factoring in a rural unemployment guesstimate, nationwide unemployment ballooned to 23 per cent.

Twenty million new workers enter China's workforce every year to fill roughly 12 million jobs. Of this, more than 5.6 million are university graduates. Roughly 40 per cent of 2007 graduates are still unemployed. A high percentage in jobs unrelated to their qualifications.

Unemployment will increase as the flow on effect impacts down the line on steel, cement, glass, ceramics, copper, nickel, metal finishing, plastics, chemicals, office and home furnishing and transport industries.

Service industries are already sacking staff.

What is China's real GDP?

China's proclaimed GDP performances have been spectacular, but do they really reflect true value and relevance?

China's financial and banking system lacks transparency. Beijing conceals what it considers "sensitive data", under state secrets classification. There is no independent method of checking crucial agricultural input to GDP. Beijing refuses to reveal full details of its methodology in determining GDP.

Statistics are subject to manipulation at all levels of government. Career advancement is tied to performance, yet those same officials produce the raw data for statistical input.

Unreliable population data also questions GDP credibility when addressing such items as local consumption, unemployment, production efficiencies, energy usage, water demand, the aged, gender imbalance, and so on.

Another key missing from China's real GDP is the level of national debt, concealed by off balance sheet accounting and state secrets classification. This includes the liabilities of China's policy banks, debt owed by state owned enterprises, debt owed by Peoples Liberation Army (PLA) commercial enterprises, subsidies for energy, fuel, water and grain, social welfare and health care provisions to name a few.