China's economy is bigger than statistics

By Nana K Sidibe: 0 Comment(s)Print E-mail China.org.cn, May 21, 2013

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The Chinese economy is bigger by international standards than what its statistical data show, according to economist and senior fellow at the ChongYang Institute for Financial Studies, Renmin University of China, John Ross.

Ross is currently in the Chinese capital to conduct a series of lectures on the global economy, the financial crisis and its overall effect on the Chinese economy.

Dr John Ross at a lecture on the US economic situation and its consequences for China on May 20 in Beijing. [By Li Shen/China.org.cn]

"Many of the facts presented in the Chinese media are not facts, but the reverse of facts," said Ross.

The methods of economic data analysis used by the majority of Chinese media are at least 20 years old, focus too much on the total factor productivity and not enough on capital growth.

The Chinese media argue that China's economy will slow down because of the country's aging population and a decrease in labor hours, he explained. He also emphasized how he believes that in fact "investment determines if the economy is going up or down."

Ross believes capital growth is a more decisive factor than total factor productivity and rejects the idea that China will get old before it gets rich.

Labor accounted for only 9 percent of China's GDP expansion from 1995 to 2005 and China's total factor productivity in fact cannot speed up because it is already at a higher average than that in other nations.

The slowdown of the Chinese economy is yet another misconception according to Ross.

"China is maintaining its lead in growth over the advanced economies," said Ross.

Ross says that China's economy will slow down, but not by much. Chinese investments are less efficient due to the financial crisis, yet every country has been affected by the crisis.

"It [the International Monetary Fund] calculates China will become the world's largest economy in purchasing-power parity by 2017," he explained. "That is in four years [from] now. Its assumption is that the U.S. growth will be three percent and China's growth will be 8.4 percent."

A speeding up of the United States' economy also seems unlikely. The American economy is becoming less and less competitive.

"U.S. industrial production is still 2 percent below its peak prior to the crisis," said Ross. "That is the reason why there is no industrial rebirth."

The industrial collapse in the European Union and Japan makes the situation in the United States look better than it really is.

Yang Rui, host of CCTV's "Dialogue," said that Ross' opinion of China's economy was too optimistic. China has to resolve its issues of sustainable growth and the growing demand of the middle class, among others.

Ross concluded his lecture by saying that some of the ways to slow down China's economy were to reduce foreign investment in China. Invest somewhere else or appreciate the RMB, he said.

None of these solutions being feasible, Ross said that China would actually have to commit suicide for its economy to slow down.