http://46.59.1.2/cable/2007/03/07BEIJING1760.html
 
A Chinese official explains how GDP numbers are 'for reference only.'
 
FROM: BEIJING, CHINA
TO: STATE DEPARTMENT
DATE: MARCH 15, 2007
CLASSIFICATION: CONFIDENTIAL
SEE FULL CABLE
 
The Economy: Not By the Numbers -------------------------------
 
¶3. (C) Describing some of the challenges he faces as Party Secretary, Li related that despite brisk economic growth of SIPDIS 12.8 percent in 2006, Liaoning's income gaps remain severe. Liaoning ranks among the top 10 Chinese provinces in terms of per capita GDP, yet the number of its urban residents on welfare is among the highest in the country and average urban disposable income is below the national average. By contrast, rural disposable incomes are above the national average. Even so, incomes for Liaoning farmers are only half that of urban residents.
 
¶4. (C) GDP figures are "man-made" and therefore unreliable, Li said. When evaluating Liaoning's economy, he focuses on three figures: 1) electricity consumption, which was up 10 percent in Liaoning last year; 2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and 3) amount of loans disbursed, which also tends to be accurate given the interest fees charged. By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are "for reference only," he said smiling.

China’s economy is history’s biggest bubble and may be headed for collapse, according to Richard Duncan, chief economist at Blackhorse Asset Management Pte. who predicted a credit boom would trigger a global recession.
 
A more than 50 percent surge in China’s money supply since 2008 helped fuel economic growth in excess of 9 percent per year, even as trading partners sank into recession. The expansion also saddled the country with factories that produce three times more goods than can be bought by China’s workers, 80 percent of whom make less than $5 a day, said Duncan.
 
“China has the greatest economic bubble in history,” said Duncan, author of “The Dollar Crisis” first published in 2003. “There’s a real risk it’s going to collapse in a Great Depression-style scenario.”
 
The pin that may prick China’s bubble, Duncan said, is a backlash against free trade among voters in the U.S., where unemployment last month rose to the highest since April. The U.S. House of Representatives in September enacted legislation that would let U.S. companies petition for duties on Chinese imports to compensate for the effect of an undervalued yuan. Protectionist sentiment could gather steam in the next two to three congressional election cycles, Duncan said.
 
To prop up the flagging U.S. economy, the Federal Reserve last month announced a new round of so-called quantitative easing, $600 billion in Treasury purchases through June intended to keep borrowing costs low and deflation at bay. Chinese central bank adviser Xia Bin said the plan amounted to “uncontrolled” money printing.
 
‘Hugely Hypocritical’
 
“It’s hugely hypocritical for the Chinese to say anything about the U.S. doing quantitative easing because they’re the kings of quantitative easing,” Duncan said in a phone interview this week from Bangkok.
 
Premier Wen Jiabao’s government has been creating about $250 billion worth of yuan each year “out of thin air,” Duncan said. To keep its currency from appreciating, the People’s Bank of China has been printing yuan to offset the dollars flowing in from a trade surplus that expanded to $27.2 billion in October, the most since July.
 
China’s gross domestic product will by expand by 9.2 percent this year, according to the median estimate of 17 economists surveyed by Bloomberg News, poised to overtake Japan as the world’s second-largest economy.
 
Central banks in the U.S., Japan and the U.K. have embarked on quantitative easing this year to spur growth, while Europe has responded to a sovereign-debt crisis by setting up a $1 trillion bailout fund. The dollar has fallen 9 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes. The pound has declined 1.7 percent and the yen has risen 0.1 percent.
 
‘More Paper Money’
 
“We’re going to have more paper money creation, so the dollar is going to continue losing value,” Duncan said. “Right now, the Fed is in the lead, but given the crisis in Europe, the European Central Bank may have to step in with another big round of its own money creation to bail out the banks.”
 
The dollar will weaken to $1.3600 per euro by the end of the first quarter in 2011, according to the median forecast of 40 analysts surveyed by Bloomberg News.
 
As an analyst, Duncan began warning of imbalances in Thailand’s economy in 1993, preceding a devaluation of the baht in 1997 and the Asian financial crisis. Before joining Singapore-based Blackhorse, Duncan was head of investment strategy at ABN Amro Asset Management. He has also held positions at Salomon Brothers Inc. and the World Bank.
 
Trade Deficits
 
In “The Dollar Crisis,” Duncan argued that persistent trade deficits by the U.S. were creating an unsustainable boom in global credit that was destined to break down, resulting in a worldwide recession.
 
Monetary and fiscal stimulus by governments around the world helped keep the recession from becoming a depression, Duncan said this week. They don’t address the core problem, which is the collapse of American manufacturing, he said.
 
The U.S. government should boost investment in fields such as nanotechnology and solar energy that could help rebuild the nation’s export sector, according to the economist.
 
“The current policy response -- trillion dollar budget deficits and paper money creation on a mind boggling scale -- is based on the belief that it’s better to die tomorrow than to die today,” Duncan said. “There’s no evidence to suggest that it’s going to correct the root cause of the problem.”

China's property bubble getting worse: state media
 
(AFP) – 23 hours ago
 
BEIJING — A Chinese government think tank has warned the country's real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 percent, state media reported Thursday.[...]

 
China, bubble the main fears for commods - BarCap
 
    *
 
 
 
Thu Dec 9, 2010 4:39pm EST
 
 * China slowdown bigger fear than U.S. regulation
 
 * Possible price bubble in commodities another worry
 
 * Absolute returns top reason for investing in commods
 
 * Copper seen top gainer in 2011, followed by grains, oil
 
 NEW YORK, Dec 9 (Reuters) - Commodity investors now fear a
slowing Chinese economy more than U.S. financial regulations
and many worry of a bubble if markets keep rallying with little
heed to fundamentals, a survey by Barclays Capital found.
 
[...]