The China house of cards - a 2009 scenario

The credibility of China's economic disclosures raised doubts about the veracity of its economy and reserves. The September 2008 economic crisis appears capable of pushing a declining Chinese economy over the edge. A notoriously opaque financial reporting system, classification of key data as “state secrets”, manipulated statistics, and a compliant state-controlled media effectively conceals the true state of the economy and real impact of the crisis.

Is China's GDP growth real?

China claims that it can maintain 8 per cent GDP growth. Flawed methodology, omissions, and manipulated statistics however discredit the 8 per cent.

A 2007 World Bank report estimated total cost of China's air and water pollution at around 5.8 per cent of GDP.

Combining realistic levels of unemployment and hidden national debt with realistic statistics on agriculture, environmental degradation, social security, and health will reveal China's real GDP growth already below sustainable levels.

The CCP considers continuing high economic growth crucial for the survival of China and the CCP itself. It is a job for the spin-doctors.

Are China's reserves real?

China's massive foreign exchange reserves and surpluses amassed during years of record double-digit economic growth may yet emerge illusionary, concealing massive, increasing national debt.

"Innovative bookkeeping" may conceal massive subsidies and the true level of huge losses by iconic state owned enterprises, including banks.

Unemployment

Flawed methodology and manipulated statistics also hide real levels of unemployment and its impact on GDP growth. About 20 million new workers will enter China's 2009 workforce to compete with growing millions of recent and longer-term unemployed, for decreasing numbers of jobs.

The farcical 4.5 per cent official unemployment figure is for registered urban populations only. Adding the more than 150 million rural unemployed and others excluded from the official statistics could push China's real unemployment beyond 12 per cent.