Those untrustworthy Chinese economic numbers

Regular readers will know that I've been a long-term skeptic about the economic figures reported by the Chinese government (for example, here and here back in 2004). As a result, this post at the Economist is not very surprising:

As China's importance in the global economy increases, investors are paying more attention to its economic numbers. Yet the country's official statistics are notoriously ropy. Some commentators accuse China's government of overstating GDP growth for political reasons, others complain that the official inflation rate is fraudulently low. So which data can you trust?

One reason to be suspicious of GDP figures is that China is always one of the first countries to report them, usually only two weeks after the end of each quarter. Most developed economies take between four and six weeks to produce them.

However, the Economist still feels that the Chinese economy is larger than reported. My sense of distrust in the figures argues for it being neither as big nor as robust as the reported figures indicate. They're professional economic reporters . . . I'm a guy typing a blog entry. I wonder what the long-term odds are for either of us to be closer to the truth?

It's tough to disagree with this, though:

The prize for the dodgiest figures goes to the labour market. The quarterly urban unemployment rate is meaningless because it excludes workers laid off by state-owned firms as well as large numbers of migrant workers, who normally live in urban areas but are not registered. Wage figures are also lousy. There has recently been much concern about the faster pace of increase in average urban earnings. But this series does not cover private firms, which are where most jobs have been created in recent years.

Now that China is such an engine of global growth, it urgently needs to improve its economic data. Only a madman would drive a juggernaut at full speed with a faulty speedometer, a cracked rear-view mirror and a misty windscreen.

QotD: Some good advice

With the possible exception of Disney villains, Imagethief cannot think of a group of people that more richly deserve their miserable fates than Hong Kong celebrity Edison Chen and his cavalcade of cupcakes.

If I sound unsympathetic here, that is because I am unsympathetic. Really, how dumb do you need to be? On all sides? Girls, here's a free piece of advice for you from your friendly neighborhood PR man: If you let a guy take digital nudie pix of you, sooner or later those pix are going to end up on the Internet. Not maybe. Not could be. Inevitably. The Internet is like a gravity well for nudity, and there is a 100 percent chance those pictures will end up there someday. Probably the week of your wedding.

[. . .]

But — and I say this with affection for my gender — dudes are stupid. We're especially stupid when it comes to managing technology effectively. We like to portray ourselves as masters of technological realm, with amazing powers of digital wizardry. But a little knowledge is a dangerous thing and in reality we're as screwed over by modern technology as your grandmother. Probably worse, because at least she doesn't pretend to understand it. We'd rather die — or inflict crushing humiliation on our girlfriends — than admit weakness.

"ImageThief", "Let me tell ya about Edison Chen's dirty photos", ImageThief, 2008-02-13

On the subject of "toilet humour" . . .

. . . there's this.

China Dispatch: Using the Squat Toilet

Rule One: Exhaust all other possibilities.

If you are truly in need and condemned to use the squat toilet, comfort yourself with the knowledge that you are several thousand miles from friends and family. No one has to know.

Proceed as follows:

Most stalls do not have toilet paper. This is the best time to realize this. Either take paper from the general dispenser in the bathroom area or preferably bring your own as it will be made of tissue and not plywood carpaccio.

It gets much, much worse.

Link courtesy of "Da Wife", who clearly isn't planning a trip to that part of the world in the near future.

Different, um, strokes?

I can't possibly improve on the title of the post at Hit and Run, "Bullwhips vs. Octopi in Japan":

The land of tentacle porn considers loosening up on Robert Mapplethorpe [. . .]

At least Colby agrees with me . . .

Colby Cosh finally admits to feeling similar concerns about the widespread belief in official Chinese economic figures:

Are the spectacular Chinese economic growth numbers of the post-Deng era reliable? The West has been tricked into bad policy decisions before because economists foolishly trusted Communist growth estimates. The George Mason economist Bryan Caplan has just voiced what I've been thinking since the early 1990s (which is admittedly a long time to wait for data to be falsified)

[. . .]

The two-headed creature so often talked of as "Chinanindia" (I think at this point we can just start calling it "Chindia") has taken over from Japan in our imaginations as the next "obvious" successor to the economy supremacy of the West. Japan turned out to be the wrong horse to bet on, and still hasn't fixed all of its macroeconomic issues. And it is often forgotten that even by official numbers China's economy is still much smaller than the U.S.'s and is dwarfed by the combined size of NAFTA and the EU.

Of course, I've been riding this hobby horse occasionally since 2004.

Sushi: 19th century McDonald's equivalent

Katherine Mangu-Ward reveals the dirty secret behind sushi:

For traditionalists in 19th-century Japan, a new sushi place was a sign the neighborhood was going to hell. In 1852 one writer grumped about the proliferation of sushi stalls in booming industrial Tokyo. The McDonald's of their day, the stalls offered hungry factory workers a quick, cheap meal of fish and sweetened, vinegared rice. If the fish wasn't top of the line, well, a splash of soy sauce and a dab of spicy wasabi perked up a serving of fish gizzards nicely, with some antimicrobial benefits to boot.

Today that writer's spiritual descendants dwell on food chat boards like Chowhound, where calling a new Japanese place "inauthentic" or deriding it as "strip mall" or "food court" quality is the kiss of death. When we think of high-end, "authentic" sushi today, we envision rich, fatty slices of smooth tuna and creamy salmon arranged on a pristine plate — the height of elegant Japanese cuisine. But sushi wasn't always elegant, and salmon and tuna are relatively recent additions to the menu. In that sense, sushi's appearance in food courts worldwide is more a return to the dish's common roots than a betrayal of authenticity. Sushi has always been in flux, with new ingredients and techniques added as convenience demanded. Globalization has sped up that process exponentially, bringing novelty to an old food and bringing traditional food to new places. The story of sushi is the story of globalization writ small — very small, on tiny slivers of raw fish.

QotD: The Pacific War

I am watching Flags Of Our Fathers, which I believed was a gritty, realistic, reverent account of the battle of Iwo Jima. It may yet become that. So far, aside from some horrifying battle sequences, it is movie about the cynical, callous exploitation of the famous flag-raising picture. Apparently every state-side government employee was a brittle, shallow, two-faced, glad-handing PR-minded ass who regarded soldiers as ignorant cattle. I also have the Japanese version of the movie, Letters from Iwo Jima. I have this odd feeling it will concern itself very little with the issues raised in this movie. I have the feeling I’ll be hearing a lot about honor. I have the feeling that I will be informed that war is hell on everyone, and the enemy are human as well - two things that never occured to me. I do know that the state-side PR effort for WW2 was phony and false, because the way the movie lit the Andrews-Sisters wannabees and had them sing patriotic songs with exaggerated cheer tells me all I really needed to know. This strange stark contrast to the grim realities of war makes me question the premises of the war against fascism! Why, they're selling the war! The bond drives should have consisted of grim dour matrons urging a negotiated settlement to the strains of a Kurt Weill song. Anything's better than a perversely calculated ad campaign designed to elicit voluntary contributions.

James Lileks, The Bleat, 2007-10-03

QotD: Burma and Buddhism

The State Peace and Development Council derives its legitimacy from public support for Buddhism, and in recent years has leaned even more heavily on approving pronouncements from prominent religious officials. Theravada Buddhism is the establishment religion under a repressive military regime. No actual Burma scholars dispute this, as far as I know. Anyone with doubts should check out the military’s propaganda paper, which is a dual attempt to showcase the devotion of military officials and advocate peaceful, Buddhist complacency on the part of the Burmese. It adopts the tone of an authoritarian yoga instructor for a reason.

The monks, known as the sangha, regularly accept extravagant and highly publicized gifts from well placed military officials; this is a desperately poor country filled with solid gold pagodas. The rebuilding of Buddhist shrines can be a public project, with villagers force to participate. Monks have in the past refused to perform ceremonies for NLD members. It's difficult to define complicity when everyone may be acting out of fear, but you can't call a religion that confers legitimacy on a bunch of thugs (and advocates passivism in response) entirely helpful.

Yes, the Burmese monks have a history of peaceful protest, as in 1990 and 1962. But you wouldn't want to define the monks by these protests any more than you would a pope by his opposition to communism. It's rather more complicated than that.

Kerry Howley, "Buddhism Is Not a Democracy Movement", Hit and Run, 2007-10-01

QotD: Regulating Reincarnation

In one of history's more absurd acts of totalitarianism, China has banned Buddhist monks in Tibet from reincarnating without government permission. According to a statement issued by the State Administration for Religious Affairs, the law, which goes into effect next month and strictly stipulates the procedures by which one is to reincarnate, is "an important move to institutionalize management of reincarnation." But beyond the irony lies China's true motive: to cut off the influence of the Dalai Lama, Tibet's exiled spiritual and political leader, and to quell the region's Buddhist religious establishment more than 50 years after China invaded the small Himalayan country. By barring any Buddhist monk living outside China from seeking reincarnation, the law effectively gives Chinese authorities the power to choose the next Dalai Lama, whose soul, by tradition, is reborn as a new human to continue the work of relieving suffering.

Matthew Philips, "BeliefWatch: Reincarnate", Newsweek, 2007-08-20

When coming in to the office seems too much like work

. . . imagine coming in to a job like this every morning:

Frankly, I have to admit in general that push systems are to working steam railways what pornography is to real sex, both are great in moderation but neither is quite as good as the 'real thing'. The 300mm (!) gauge colliery railway at the top end of Sichuan's Shibanxi railway is, however, a little bit special. I make no claim to originality, others like Hiromi Masaki have been here before. Being extremely committed in other directions, I had not bothered to check their sites before I came, I just noted some advice from John Raby to check it out during my visit. Thanks are due to all concerned for pointing me in the right direction.

Makes the old 9-to-5 seem positively sybaritic, doesn't it?

An anti-hagiography of Nehru

Paul Marks does his bit to balance the historical record on one of the key movers in the Partition of India, Jawaharlal Nehru:

With the 60th anniversary of the end of British rule in the sub continent, there is the normal talk of whether the vast numbers of rapes and murders during partition could have been prevented. The British will, perhaps quite rightly, get the blame for not delaying independence and for not using enough force to try and prevent the violence on partition.

However, it is almost forgotten that Nehru (the leader of the Congress party and first Prime Minister of India) was demanding that the British leave (every day we stayed was a day too many for Nehru), and even claimed that it was mainly where the British were that violence took place.

This was the exact opposite of the truth (and Nehru knew it) — as it was where British forces went in (sadly much too rarely) that the mass rapes and killings were prevented. Nehru had "form" in letting his "get the British out of India" obsession cloud his judgement.

Here's the Wikipedia entry (complete with the always-amusing "weasel words" warning). And the one on the Partition of India.

Modern China

Guy Sorman talks about the state of China:

The Western press is full of stories these days on China's arrival as a superpower, some even heralding, or warning, that the future may belong to her. Western political and business delegations stream into Beijing, confident of China's economy, which continues to grow rapidly. Investment pours in. Crowning China's new status, Beijing will host the 2008 Summer Olympics.

But China's success is, at least in part, a mirage. True, 200 million of her subjects, fortunate to be working for an expanding global market, increasingly enjoy a middle-class standard of living. The remaining 1 billion, however, remain among the poorest and most exploited people in the world, lacking even minimal rights and public services. Popular discontent simmers, especially in the countryside, where it often flares into violent confrontation with Communist Party authorities. China's economic "miracle" is rotting from within.

I've had my own concerns about the real issues of the new Chinese economy.

The Chinese economy

Everyone must have heard many different variations on how incredible the Chinese economy is: spectacular growth, innovations galore, etc., etc. And there's much truth to it — China has been industrializing at a mind-croggling pace. At least, the visual evidence says so. The economic data coming out of China is, to be kind, not as dependable as similar data from most other countries.

I realize it's considered bad form to quote yourself, but I still think the same way as when I wrote this and this.

[From August, 2004]: While there is no doubt that China is a fast-growing economy, the most common mistake among both investors and pundits is to assume that China is really just like South Carolina or Ireland . . . a formerly depressed area now achieving good results from modernization. The problem is that China is not just the next Atlanta, Georgia, or Slovenia. China is still, more or less, a command economy with a capitalist face. One of the biggest players in the Chinese economy is the army, and not just in the sense of being a big purchaser of capital goods (like the United States Army, for example).

The Chinese army owns or controls huge sectors of the economy, and runs them in the same way it would run a division or an army corps. The very term "command economy" would seem to have been minted to describe this situation. The numbers reported by these "companies" bear about the same resemblance to reality as those posted by Enron or Worldcom. With so much of their economy not subject to profit and loss, every figure from China must be viewed as nothing more than a guess (at best) or active disinformation.

Three years on, I must retract a tiny bit there . . . Enron's and Worldcom's figures, while deliberately misleading, were refutable (and the culprits taken to court).

[From October, 2004]: Much of the problem is that even now, the Chinese economy is not particularly free: the official and unofficial controls on the economy provide far too many opportunities for rent-seeking officialdom to play favourites and cripple antagonists (and for once, "cripple" is not just a bit of hyperbole). Any numbers provided by the Chinese authorities can not be depended upon, and should probably only be viewed as an indication of what the Chinese government wants the outside world to believe.

Even in a relatively free economy like Canada, the underground economy can be huge, with plenty of economic activity happening out of reach of the taxman. In China, where everybody was raised in an environment where providing the "wrong" answer to your leader could get you imprisoned (or executed) as an economic criminal, the numbers upon which the bankers and financial officials depend can only be described as extremely unreliable.

Samizdata links to a brief Tyler Cowen post which includes this quote:

...of the 3,220 Chinese citizens with a personal wealth of 100 million yuan ($13 million) or more, 2,932 are children of high-level cadres. Of the key positions in the five industrial sectors - finance, foreign trade, land development, large-scale engineering and securities - 85% to 90% are held by children of high-level cadres.

That's even higher than I expected. But it's an excellent example of what I originally wrote about back in 2004: the economy isn't free, and the beneficiaries are disproportionally those who are politically well-connected. Caveat investor.

Japanese Culture, 101

The art and science of eating sushi . . . a much more intricate and culturally sensitive topic than you might think.

China's economic prospects

Samizdata Illuminatus has some interesting thoughts on the recent economic disruptions emanating from China:

In spite of a widespread belief in China's embrace of free-market capitalism, enormous economic distortions characterise modern China's economy. For example, why is it that, relative to China's economic footprint, the Chinese stock market is rather pathetically stunted — especially in light of the vast savings pool the Chinese people have accumulated? As mentioned in the above article, the Chinese are great savers and they tend to deposit these savings into bank accounts because alternative investment opportunities are limited compared to those offered to a Western investor. Consider the following:

Why does the Chinese investor not sink his surplus funds into foreign commodities? Because he is restricted from doing so.

Why does he not invest in Chinese stocks? Because he (probably correctly) views the Chinese stock market as being distinctly ropey.

In light of these state-imposed distortive realities, what does one do with one's savings? One puts them in the bank, of course. Predictably, the banks are awash with deposits. Under these circumstances, the principles of fractional reserve banking have been taken to the extreme in China, allowing the central government to durably zombify huge segments of the otherwise bankrupt state-owned industrial sector by forcing the "big four" state-owned banks to continuously loan depositors' money to these failed state enterprises, in the full knowledge that these loans will never be repaid.

Of course, you'd expect me to be bearish on the Chinese economy, based on things I've posted before.

How illegal distribution created an $80 billion market

Anime hit it big outside Japan, due, in large part, to becoming an underground phenomenon:

The global sales of Japan's animation industry reached an astonishing $80 billion in 2004, 10 times what they were a decade before. It has won this worldwide success in part because Japanese media companies paid little attention to the kinds of grassroots activities — call it piracy, unauthorized duplication and circulation, or simply file-sharing — that American media companies seem so determined to shut down. Much of the risk of entering Western markets and many of the costs of experimentation and promotion were borne by dedicated consumers.

QotD: Gender Imbalances in China

[. . .] in the east the so-called guang gun — "bare branches": since China introduced its "one child" policy in 1978, the imbalance between the sexes has increased to the point where there are 119 boys for every 100 girls, the most gender-distorted demographic cohort in history. The pioneer generation of that 20 per cent male surplus is reaching manhood now. Asked about this on the radio a year or two back, I suggested that maybe China's planning on becoming the first gay superpower since Sparta, and promptly received a ton of indignant emails.

Mark Steyn, "The future is spelled C-H-I-N-A", Macleans, 2006-05-26

Vending Machines

If you like vending machines, Japan is the place to go:

PhotoMann recently decided to 'collect' images of unique vending machines found in Japan. They are everywhere. Estimates suggest there are 5.6 million vending machines which works out to be one for every 20 people in Japan. Sales from vending machines in 2000 totaled $56 billion! The most common are drink and cigarette machines followed by machines with pornography.

Of course, no post on Japanese culture is complete without the obligatory "you've got to be kidding me" entry:

Truly Bizarre!!

This vending machine has truly bizarre contents... 'used' schoolgirl panties! We had heard that such machines existed but had never seen them. A colleague came across this machine in suburban Tokyo just recently (May 2002). This particular machine is a converted cigarette machine that now takes 10,000 yen notes (about US$80 bills). The current contents run from 1000 to 3000 yen.

Hat tip to "JtMc" for posting the link.

Amusing timewaster

Craig Zeni sent this link along with the following advice:

[. . .] pull the slider to 1:30 to get past the anime howling and be amused by Rube Goldberg in Japan.

Feel free to watch the anime introduction if that sort of thing appeals to you. I jumped straight to 1:29, personally. ;-)

Flea-bait?

This is something I'd have expected to find referenced at Ghost of a Flea; it has all the necessary elements for passing the Flea-worthiness test (Japanese pop culture, media tie-in, and hilarious understatement):

Maid cafes dot Akihabara, which has become a second home for Tokyo's "otaku" — roughly translated as "geeks". They're known for their devotion to comics and computer games and can easily be identified by their standard outfit of track suit, knapsack and spectacles.

In the cafes, girls dressed in frilly frocks inspired by comic-book heroines wait hand and foot on customers, mostly male, who might have once been obsessed with naughty schoolgirls and nurses.

Emphasis added. "Might once have been", eh?

H/T to Fark.com, where the comments include a very funny image comparing Anime to real life.

Update: I should know better than to try to jump on a Flea topic before the Flea himself does. I am so PWNED.

The Ghost of a Conscience

Nick Packwood has little patience for the expected flood of "Japan as victim" noise on the anniversary dates of the Hiroshima and Nagasaki nuclear bombings:

Fifty years after the end of the war the democratically elected and representative government of Japan still refused to assist in war crimes proceedings regarding biological warfare. In addition to the tens of thousands killed by Japanese germ warfare, Unit 731, Unit 100, Unit 516, Unit 1855 and other research facilities were directly responsible for the deaths of ten thousand people in the course of medical experimentation. Live un-anesthetized vivisection was a common practice.

This is to say nothing of the remaining grotesquerie of Japanese war crimes. Hundreds of thousands raped and forced into sexual slavery, the mass torture, abuse and murder of prisoners of war and atrocities such as the Nanjing Massacre that manage to exemplify the actions of imperial Japan's people while being entirely unexeptional.

I have little patience for much of what is going to be said about Hiroshima on August 6 or Nagasaki on August 9. More particularly, with everything people will choose not to say.

No amount of retrospective angst, regrets, and belated second thoughts on the part of the allied nations of World War Two seems to be enough. No amount of contrition or genuine remorse on the part of the successor government of Japan seems to be too little. There's a moral disconnect there, wouldn't you say?

China cracks down on blogging . . . again

Myrick calls for help tracking access for Chinese blogs, as several Chinese blogs have become inaccessible from major cities in China.

"Sponsors of the current crackdown include . . ."

Chinese characters in tattoos

Victor got a henna tattoo at the Brooklin Spring Fair a couple of weeks ago. It's long gone now, but it was a set of Chinese characters on the back of his hand. He assured me that it meant something like "Strength and Courage", but he was just taking the word of the girl operating the booth. If you wonder what some Chinese or Japanese characters might actually mean, you'll want to bookmark Hansi Smatter, subtitled "Dedicated to the misuse of Chinese characters (Hanzi or Kanji) in Western Culture".

I especially recommend visiting that blog before you pay the tattooist for your full-torso tattoo full of cool oriental symbols. . .

In China, cigarette smoking is good for you

The Chinese market for cigarettes is 99% state-controlled. As a result, the government spends a lot of time and effort pushing the benefits of cigarette smoking:

Cigarettes, according to China's tobacco authorities, are an excellent way to prevent ulcers.

They also reduce the risk of Parkinson's disease, relieve schizophrenia, boost your brain cells, speed up your thinking, improve your reactions and increase your working efficiency.

And all those warnings about lung cancer? Nonsense.

You're more likely to get cancer from cooking smoke than from your cigarette habit.

Welcome to the bizarre parallel universe of China's state-owned tobacco monopoly, the world's most successful cigarette-marketing agency.

When the monopoly profits from this controlled trade go directly into the government's coffers (or, more likely, the private pockets of generals and high party officials), the chance that a dissenting view will be crushed approaches absolute certainty.

Hat tip to Jon.

Chinese submarine accident reported

The Japanese media are reporting on a Chinese diesel-electric submarine which appears to have suffered some disabling damage near the Spratly Islands:

A Chinese Navy submarine stalled apparently after a fire broke out aboard the vessel while it was submerged in the South China Sea, sources close to the Japanese and U.S. defense authorities said Monday. As of Monday afternoon, the submarine was being towed above the water in the direction of Hainan Island. The Japanese and U.S. governments have been monitoring the vessel, and it is unknown whether there were any casualties, the sources said.

The warship in question is a Chinese Navy Ming-class diesel-powered hunter-killer submarine, the sources added.

According to the sources, the accident occurred in international waters about halfway between Taiwan and Hainan Island on Thursday, and the submarine was being towed by a Chinese vessel apparently in the direction of Yulin Naval Port on the island. It is not known whether the submarine surfaced on its own, the sources added.

A New "Toy" From Japan

Japanese 'lap pillow' offers solace to lonely men.

"I think this may be good for single men, but it could cause trouble for someone who is married," said Shingo Shibata, a 27-year-old company employee browsing at a toy store which sells the pillow.

More Economic Voodoo — or is that Feng Shui?

Again this morning, I was listening to my local jazz radio station on the way in to work. As usual, they had a broker from CIBC Wood Gundy giving portfolio advice at about 9:20 a.m. Today's talk was about investing in China, and how the markets have been reacting to the recent small drop in the official GDP growth figures released by the Chinese central bank.

This time, the emphasis was on the idea that in spite of the breathtaking growth figures, Chinese firms still are not particularly profitable and that therefore there are better ways of investing your money to benefit from all that growth. Unlike the last time I addressed this issue, this time I thought that the advisor was actually making pretty good sense. The incredible transformation of China from a pure command-driven economy to a mixed economy will certainly provide lots of opportunities for people to get rich; it will also provide even more opportunities to lose big money.

Much of the problem is that even now, the Chinese economy is not particularly free: the official and unofficial controls on the economy provide far too many opportunities for rent-seeking officialdom to play favourites and cripple antagonists (and for once, "cripple" is not just a bit of hyperbole). Any numbers provided by the Chinese authorities can not be depended upon, and should probably only be viewed as an indication of what the Chinese government wants the outside world to believe.

Even in a relatively free economy like Canada, the underground economy can be huge, with plenty of economic activity happening out of reach of the taxman. In China, where everybody was raised in an environment where providing the "wrong" answer to your leader could get you imprisoned (or executed) as an economic criminal, the numbers upon which the bankers and financial officials depend can only be described as extremely unreliable.

Update 26 October: The Last Amazon asks a highly pertinent and pointed question:

In the past week, the Globe and Mail has been featuring the economic engine that China has become. It's economy is thriving so much so that Chinese government owned companies like China Minmetals Corp (which had revenues in 2003 of USD$11.7 billion) is currently negotiating to buy outright 100% of the stock of the Canadian mining corporation, Noranda Inc. The total stock is estimated at approximately CDN$6.7 billion.

If the Chinese government can afford to buy Noranda Inc. why hasn't anyone asked when China will reimburse the overburden Canadian taxpayers of this fair land for the Cdn$65.4 million that has been given to China as foreign aid?

Canada's Evil Design To Enslave China Revealed!

Conrad, at The Gweilo Diaries has a scoop:

It was bound to happen eventually — the folks at China Daily have finally gone well and truly bat-shit:

This China, would have been split and subverted into many different lands and many different slave nations for the west, if not for a group of men led by one man, and that man was the mighty Chairman Mao.

Who instead enslaved China himself.

Slave nations, under Russia and the USSR, under Japan, under, the USA, under Canada, under the UK, under France, under Germany, under even Australia and New Zealand, under Thailand and Vietnam, under India and even Pakistan.

Accepting that Japan, Britain, France, Germany and the US have some dodgy Sino-history to answer for, under Canada? Who the hell have the inoffensive Canooks ever enslaved? New Zealand? With what, an expeditionary force comprised of sheep? Pakistan? The Pakis can't even control the northern half of their own country, much less China. And finally, it takes a particularly through-the-looking-glass view of Asian history to think that Vietnam has ever posed a threat to Chinese sovereignty.

Curses! Our intended victims have divined our evil plan! I was getting used to the idea of owning Manchuria, too! Just think: we'd have nearly doubled the size of Canada, and increased our population by, er, a very big number.

Oh, well, call off the invasion: we'll resume the original plan of subverting Hollywood.

Rant: "The Chinese Economy"

On my way in to work this morning, I heard a stock advisor doing his best to make reasonable assumptions about what the average listener needed to know about the economy. This guy has been pretty level-headed in the past, but this morning's talk just got my head ready to explode.

The topic of discussion was the Chinese economy and how the Chinese central bank was having to take greater efforts to rein in economic expansion. He talked about how many different sectors of the North American economy were, to greater or lesser degree, depending more and more on Chinese growth to increase their own investments and output. The idea that the Chinese economy was "overheating" was bandied about. He closed by indicating that a slight drop in the official growth rate from 9.8% to 9.6% showed that the Chinese central bank was seeing some results from their intervention in the economy.

There are so many things wrong here that I'm almost at a loss where to start. While there is no doubt that China is a fast-growing economy, the most common mistake among both investors and pundits is to assume that China is really just like South Carolina or Ireland. . .a formerly depressed area now achieving good results from modernization. The problem is that China is not just the next Atlanta, Georgia or Slovenia. China is still, more or less, a command economy with a capitalist face. One of the biggest players in the Chinese economy is the army, and not just in the sense of being a big purchaser of capital goods (like the United States Army, for example).

The Chinese army owns or controls huge sectors of the economy, and runs them in the same way it would run a division or an army corps. The very term "command economy" would seem to have been minted to describe this situation. The numbers reported by these "companies" bear about the same resemblance to reality as thos posted by Enron or Worldcom. With so much of their economy not subject to profit and loss, every figure from China must be viewed as nothing more than a guess (at best) or active disinformation.

Probably the only figures that can be depended upon for any remote accuracy would be the imports from other countries — as reported by the exporting firms, not by their importing counterparts — and the exports to other countries. All internal numbers are political, not economic. When a factory manager can be fired, he has his own financial future at stake. When he can be sentenced to 20 years of internal exile, he has his life at stake. There are few rewards for honesty in that sort of environment: and many inducements to go along with what you are told to do.

Under those circumstances, any growth figures are going to be aggregated from all sectors, most of which are under strong pressure to report the right numbers, not necessarily corresponding with any real measurement of economic activity. So, if the economic office wants to see a drop in the economy, that's what they'll get.

Basing your own personal financial plans on numbers like this would quickly have you living in a cardboard box under a highway overpass. Companies in the soi-disant free world have shareholders or owners to answer to. Companies in China exist in a totally different environment.