It is well known that the Chinese Communist Party (CCP) has been launching a charm offensive towards the world, encouraging foreign direct investment into the struggling Chinese economy.
CCP state media has been promoting the expected 5% growth in the country’s Gross Domestic Product (GDP) this year, while using a new measurement standard called “high-quality development” to blur this growth, claiming to incorporate “environmental sustainability and social inclusiveness” into the CCP’s economic development model.
In fact, the slogan of “high-quality development” proposed by CCP leader Xi Jinping cannot be measured by specific standards and is already outdated.
Will all this create an illusion and confuse foreign data experts who are paying more attention to Chinese economic statistics?
On April 7, U.S. Treasury Secretary Janet Yellen was warmly welcomed in Beijing and met with Chinese Premier Li Keqiang and other senior CCP officials. CCP state media hyped this meeting, echoing Premier Li Keqiang’s emphasis on “stabilizing Sino-U.S. relations,” “not politicizing economic and trade issues,” as well as strategic messages from CCP leader Xi Jinping such as “mutual respect, peaceful coexistence, and win-win cooperation.”
The recent goal of the CCP is to restore a “normal state with Chinese characteristics,” such as ending decoupling with the U.S. and derisking with Europe, regaining foreign confidence in the Chinese economic growth model, where all benefits fall solely to China without sacrificing CCP leadership, dignity, or prestige.
However, there are continuous signs that the communist China’s economy is facing serious problems, inconsistent with the rosy prospects depicted by the CCP and its puppet media.
Let’s delve into this topic in detail.
According to the definition from Investopedia, a New York-based financial website, foreign direct investment (FDI) refers to “substantial, lasting investments made by companies or governments in foreign businesses.” Initiated in the 1970s at the behest of CCP second-generation leader Deng Xiaoping, FDI kickstarted the stagnant Chinese economy inherited from the first-generation leader Mao Zedong.
Subsequently, the “Chinese economic miracle” was built on the foundation of cheap labor, a real estate bubble, and substantial foreign investments (including capital, management and technological know-how, technology, and equipment). In addition, the CCP heavily promoted mercantilist trade behaviors, such as Chinese overcapacity/overproduction, and providing huge subsidies to lower retail costs of Chinese goods.
The CCP fully understands that foreign direct investment is a crucial pillar of its economy, and making foreigners believe that “good times are still here” is key to restoring their confidence to continue investing in China. Therefore, the clamor for win-win cooperation, mutual respect, and stable relationships seems never-ending.
Evidently, the official economic statistics of the CCP are seriously problematic. On March 6, the Wall Street Journal cited Rhodium Group, an independent research firm based in New York, which analyzed China’s GDP over the years and found that the China National Bureau of Statistics “greatly exaggerated recent growth.” Rhodium Group believes that China’s GDP growth rate in 2022 did not reach the 3% claimed by the National Bureau of Statistics, instead showing a contraction; and the projected growth rate of 5.2% for 2023 turned out to be only 1.5%.
Previous CCP economic predictions have a track record of being flawed. For 2024, they continue to forecast a GDP growth rate of 5%. The numbers may look good, but will anyone still believe them?
In recent weeks, many troubling signs have emerged and been gradually revealed by the media.
On April 1, China’s financial news website “Eastern Fortune” reported that the Chinese lithium battery industry is seriously troubled by “overcapacity and price wars,” leading many suppliers to implement “production stoppages, layoffs, and wage cuts.” In recent years, with the slowdown in global demand for electric vehicles, the capacity utilization rate of Ningde Contemporary Amperex Technology Co. Limited (CATL), a top battery manufacturer based in Ningde, Fujian Province, dropped from 95% in 2021 to 70.47% in 2023, still “far above the industry average utilization rate of ‘41.8%’.”
According to Reuters, in February this year, China’s manufacturing activity has been below the Purchasing Managers’ Index (PMI) level of 50 for the fifth consecutive month. A PMI below 50 indicates contraction rather than growth. The article bluntly pointed out: “China’s disappointing recovery after the economic crisis has cast doubt on the foundation of its economic model.”
On March 14, Reuters reported once again that there are more signs indicating that foreigners are questioning the economic data released by the CCP, “as there is a huge discrepancy between shipping data from the country of origin and China Customs data,” the U.S. Department of Agriculture no longer uses China Customs’ data to estimate China’s soybean imports, but relies on more reliable global exporter data instead. Some experts believe that China underreports soybean imports to support Xi Jinping’s national food security campaign and prepare for anticipated future economic challenges.
On March 22, Taiwan’s “Central News Agency” cited statistics from the Chinese Ministry of Finance, further indicating the economic problems existing on the mainland. The data shows that “China’s tax revenue in the first two months of 2024 decreased by 4% year-on-year, and personal income tax revenue significantly decreased by 15.9%.” These are signs of economic recession and contraction, showing no optimistic growth trend of 5% at all!
The independent video news website “China Truths” reported on March 5 about the many issues in the Chinese banking industry. Some banks have secretly implemented new withdrawal limits, and the Chinese financial industry is experiencing the “five nos” phenomenon. For instance, under the guidance of the People’s Bank of China, China Construction Bank suddenly “introduced a model that evaluates transaction history and sets corresponding limits.”
This model requires providing a large amount of personal financial and employment information to raise the daily withdrawal limit to 5,000 yuan (approximately $690). Some speculate that implementing daily withdrawal and transfer limits is to relieve the pressure on the Chinese banking system, as banks have to offset continued losses from local government’s bad real estate investments.
Another independent video news website, “China Observer,” reported at the end of February that Japan’s beverage manufacturer Yakult’s subsidiary in Shanghai laid off 800 employees. This is the first large-scale downsizing by Yakult in China. The report also discussed layoffs and pay cuts happening in factories in Shenzhen, Guangzhou, Huizhou, Dongguan, Zhongshan, and Foshan. This is one of the results of declining overseas demand and reduced foreign direct investment, as well as a serious consequence of Xi Jinping’s COVID-19 “zero-COVID” policy impacting the Chinese economy from the end of 2019.
Finally, Taiwan Semiconductor Manufacturing Company (TSMC) chose to expand production in Japan and the U.S. state of Arizona, which undoubtedly dealt a heavy blow to the CCP, as for years, the CCP has been striving and rewarding to encourage the expansion of chip production facilities in China. The tide of foreign capital leaving China is turning into a torrent, causing a severe impact on the CCP economy.
The continuous release of negative economic signals by China, along with various “statistical irregularities” in reports from official Chinese institutions such as the National Bureau of Statistics and General Administration of Customs, has finally exposed the lies fabricated by the CCP to the world.
Reuters reported on April 10 that Fitch Ratings, an international top credit rating agency based in New York and London, “downgraded China’s sovereign credit rating outlook to negative… due to risks facing public finances and increasing uncertainties in China’s transition to a new growth model.” The blame for this transition lies mainly in the “double blow of slowing growth and increasing debt” affecting the public finances.
Clearly, the CCP’s touted new mode of development for China, which supposedly includes environmental sustainability and social inclusiveness and lacks objective measurement standards, has not fooled the sharp eyes of international credit rating agencies.
For the CCP, this economic development trend is not optimistic. According to the National Institution for Finance and Development (NIFD) report in January, China’s total debt to GDP ratio in 2023 climbed to a new record of 287.8%, 13.5 percentage points higher than the same period last year.
It is obvious to discerning individuals that reduced tax revenue, imminent banking crises, weak purchasing managers’ index, increased public debt are not signs of economic growth. In fact, quite the opposite!
In this scenario, the CCP’s National Bureau of Statistics predicts a 5% GDP growth rate for China in 2024. Will anyone still choose to believe this lie?
Translator’s note: The National Institution for Finance and Development (NIFD), headquartered in Beijing, is China’s first national-level financial think tank that spans social sciences and natural sciences.
Author Bio:
Stu Cvrk served in the U.S. Navy for 30 years, holding various active and reserve positions and gaining extensive operational experience in regions like the Middle East and the Western Pacific before retiring as a captain. He graduated from the U.S. Naval Academy in Maryland, receiving a classical liberal education and later education and experience as a marine scientist and systems analyst, laying a critical foundation for his subsequent political commentary.