Boomerang Backfire: China’s Data Game in the U.S.-China Showdown

Hi, I'm Dong Shan. Welcome to Digging into China, where we explore China in depth to review unique perspectives. In today's episode, we are once again challenging the Chinese Bureau of Statistics. The Bureau has crafted such an impressive set of first quarter economic figures that they stretch creduline logical consistency. Even more amusing is the irony. The criticism China's state media leveled against the United States last year have now come back to haunt them. Truly, the archives of China's state media cannot withstand even a cursory review. The global spotlight is currently fixed on US China trade war. At this pivot moment, it's understandable why China would want a preing economic report for propaganda purposes. They proclaim our economy remains robust with a 5.4% GDP growth in the first quarter. Who claim we are faltering under American pressure? Yet consider this. If China's economy is truly thriving, why does Beijing repeatedly introduce economic stimulus measures? A stable upward trending economy wouldn't require such interventions, would it? However, reflecting further since the onset of the trade war, China has faced the US tariffs so severe they've nearly severed trade ties. Yet, where are the promised major initiatives? Reserve ratio cuts, interest rate reductions, or significant fiscal stimulus. Not one seems to have materialized. Beijing appears content with issuing slogans and a penting optimistic scenario. Could it be that the president Xiinping genuinely believes the first quarter data is strong enough to delay stimulus measures, waiting instead for a clear economic downturn before acting decisively? Indeed, Morgan Stanley's recent inquiries in Beijing suggests precisely this. She reportedly has no plans for new stimulus in the second quarter, believing the economy must visibly worsen before interventions is warranted. However, Premier Lee Chong's recent state council remarks repeatedly stressed expectation management. Expectation management implies proactive policy measures to prevent further economic decline. So, whose perspective should we trust? Does she with his approach truly grasp expectation management? Is his understanding aligned with ours? In this video, we'll delve into these questions. With the trade war at its current intensity, what is China aiming to achieve by presenting such flawless first quarter economic data? Let's begin with a humorous anecdote from China's state media. Last year, Chinese economists, patriotic scholars, and party media fiferously accused the US of falsifying its GDP. Their evidence, US electricity consumption declined while GDP rose. Since 2007, US GDP has grown 40% in real terms and 82% nominally. Yet, electricity usage has remained stagnant. In 2023, national electricity consumption fell 6% from 2022, but the GDP grew 2 and a half% and unemployment hit historical lows. Chinese experts concluded that the US GDP must be inflated, deeming it unscientific. In China's view, GDP and electricity consumption have always rise in tandem for decades. Yet, these same experts must be regretting their words upon seeing China's first quarter data this year. Electricity generation dropped to 3/10en of a percent, but the GDP reportedly surged 5.4%. By their own logic, doesn't this confirm China's GDP is fabricated? The accusations they hurled at the US last year have now boomeranged back. In truth, electricity and GDP are closely linked in China, a manufacturing giant where industry demands substantial power. Thus, GDP growth typically coincide with increased electricity generation, a pattern consistent for decades. This logic however doesn't apply to the US a consumptiondriven economy reliant on low energy sectors like services, finance, technology and information. Judging US GDP by electricity consumption is therefore misguided. So why did China's GDP rise this year despite a drop in electricity generation? This anomaly is unprecedented in recent history. Domestic brokerage explanations, often citing statistical methodology differences, failed to account for decades of synchronized GDP and electricity growth. The reality is that the Bureau of Statistics mismanaged its data manipulation, overlooking logical inconsistencies and inadvertently revealing GDP inflation. Once again, we've caught them in act. While the bureau's data is undeniably fabricated, it now functions more as a propaganda arm. Late last year, to achieve a precise 5% GDP growth target, it hastily revised the real estate statistical rules. No figure is beyond their ability to manufacture. We merely observe for amusement. Consider the first quarter consumption data almost too perfect. Retail sales of consumer goods rose 5.9% year on year outpacing any month last year. Every consumption category group including cosmetics, jewelry and office supplies which declined last year but saw significant gains this quarter. With consumption this robust, why is the consumer price index so dismal? February and March recorded the negative values and the producer price index has remained submerged. There are only two explanations. Either government subsidies and business discounts artificially boosted consumption or the data is inflated. Last year saw similar subsidies and discounts yet consumption was constrained by disposable income. Thus, I suspect the consumption data is heavily embellished and unreliable. If Xi Jinping bases macroeconomic decisions on the bureau's data, no stimulus would seem necessary as the bureau perpetually claims the economy is stable and improving. But the reality tells a different story. China is poised to issue 50-year ultra long-term bonds, a move even the US hasn't undertaken. To extend the debt cycles and support the economy in this manner hardly signals stability. As noted earlier, Morgan Stanley's findings in Beijing indicates that the second quarter will see no significant new stimulus, only extensions of current policies. For instance, the consumer goods trading program may expand from 300 billion to 600 billion U. Additional subsidies for services and child births may be introduced gradually. She believes the current data doesn't justify escalating measures and plans to reassess after the July political bureau meeting potentially adding 1 and 1.5 trillion yen in fiscal stimulus. This leads me to a hypothesis she may believe there is still room to negotiate in a trade war avoiding completed decoupling. The trade war is China's primary economic challenge. A second quarter agreement could eliminate the need for premature largecale stimulus. Why then can the US and China negotiate? I believe the issue lies with sheep. He avoids direct engagement with Trump, preferring his economic officials to draft a preliminary framework followed by a delegate signing the deal. Trump scarred by the 2018 trade war insists on negotiating directly with sheep, dismissing other officials. This stalemate stems from she's desire to repeat past the tactics and Trump's refusal to be outmaneuvered again. Unless she personally contacts Trump, the trade war will persist. Markets dismissed China's first quarter data, anticipating a grim second quarter under trade war pressure. First quarter figures lose relevance. She known for acting only when faced with undeniable evidence likely wants to assess the second quarter's economic fallout from US tariffs. If the data exceeds his expectations, he will be less inclined to negotiate. But if it deteriorates significantly, threatening social stability, he may finally engage directly. US sources indicated no direct communication since the trade war began, though indirect channels via intermediaries exist. This week's IMF and World Bank meetings in the US will see China's central bank governor Pang Gong Shan and other financial officials attend the highest level direct economic dialogue since the conflict's onset. Last week, US Treasury Secretary Bissent asked about the negotiation demands stated he wants China to expand its consumer market and seize manufacturing subsidies. This suggests the US is using the trade war to pressure China to redirect export subsidies to citizens, a change many overseas critics advocate. I remain skeptical. She prefers international spending to forge anti-US alliance over compromising with the US to narrow the trade deficit. Yet he has failed to secure a single committed anti-US ally. Spain hatched its bets with its prime minister Wooing Xi while its economic minister clarified the positions in the US. She's Southeast Asia trip yielded no anti-US commitments from Vietnam or even pro-communist Malaysia. Cambodia welcomed a Japanese warship the day she arrived and affront Russia meanwhile offered to buy Boeing jets with frozen assets immediately after China banned them. She's global spending has yield no publicly anti-US allies. His only hope is that the US struggles to finalize tariff agreements with its allies delaying reciprocal tariffs. This allows China to maintain trans shshipment trade. But once the US secures its first trade deal, the balance shifts and the China's trade encirclement begin. At that point, she may indeed reach out to Trump. So, let's stay tuned. The US China trade war promised more developments. Thank you so much for watching. If you find this video helpful, please like it, drop a comment below, and hit the subscribe button right here. It really helps YouTube suggest my video to others. I'll be back with more content soon. Until then, be well.