China just announced that the GDP growth rate in the third quarter was six percent, but Xiang Zuoxiu, a professor at Renmin University who is the deputy director of the International Monetary Research Institute, publicly questioned the number and stated that it was seriously overestimated.
On October 18th, the National Bureau of Statistics announced that GDP in the third quarter increased by six percent year over year, which was the lowest since 1992 and below the expected rate of 6.1 percent. In his Wechat account, Xiang Zuoxiu stated that the official GDP growth rate was “obviously overestimated.” He said that most of the fiscal revenue and corporate profits show negative growth. In the first three quarters the national tax revenue also showed negative growth, so how could the GDP growth rate be six percent? He analyzed that even if the tax cuts lead to a fiscal decline while GDP still maintains a growth rate of six percent, then either the corporate profits would grow rapidly or the income of the people would grow rapidly. However, neither of them happened. This indicates that the GDP growth is not so rapid.
Xiang spoke to the Executive Class of Renmin University in December last year. His speech was bold and blunt. It spread widely on the Internet but the officials also censored what he said. In his speech, Xiang pointed out that China’s economy is now in serious decline. The GDP growth rate was not 6.5 percent as the statistics bureau’s said. Instead, it was 1.67 percent, and might even be negative. He also pointed to many problems facing the current Chinese economy and society. The biggest obstacle that the companies have to deal with is that the government lacks credibility. Xiang proposed that only tax reform, political reform, and state governance system reform could solve the fundamental problems.
Source: Aboluowang, October 19, 2019