China’s real economic situation could be much worse than what the official data show, Chinese American economist Davy J. Wong said.
Goldman Sachs and Citigroup have scaled down their growth forecast for China this year to 4.7 percent in recent days after the Chinese communist regime released its sluggish economic data for August.
The ruling Chinese Communist Party’s (CCP) official annual 5 percent growth rate set for this year is unlikely to be achieved.
Because of the CCP’s increasing lack of transparency and falsification of data, it has become more difficult for Western institutions to know the real situation of the Chinese economy, which could be much worse than what the Chinese regime is admitting, according to analysts.
The CCP’s National Bureau of Statistics released data on Sept. 14 showing that the industrial output increased by 4.5 percent year over year in August, slower than the 5.1 percent year-over-year increase in July, marking the lowest growth rate since March.
Retail sales—another important economic indicator for domestic consumption—grew by 2.1 percent year over year, lower than the 2.7 percent rate in July. Fixed asset investment growth reached the lowest rate this year at 3.4 percent. All of the above data were lower than forecast.
Earlier this year, Goldman Sachs forecast that China’s full-year economic growth rate would reach 4.9 percent, while Citigroup forecast growth at 4.8 percent.
Japanese firm Mizuho Securities also downgraded China’s economic growth rate this year; on Sept. 13, it reduced its growth forecast to 4.7 percent from 4.8 percent.
Goldman Sachs expected China’s 2025 gross domestic product (GDP) growth to be at 4.3 percent.
Citigroup on Sept. 15 reduced its 2025 forecast for China’s GDP growth to 4.2 percent from 4.5 percent because of continuing weak domestic demand.
Regarding the international rating agencies’ downgrade of China’s economic forecast, Chinese American economist Davy J. Wong told The Epoch Times that the CCP’s official data “is inaccurate, unclear, and lacks details” and that “international investment banks are making a downward revision as a hedge against risk.”The Chinese regime has further obscured China’s economic information recently. Data related to land sales, foreign exchange reserves, and bond trading have been restricted. In August, the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect stopped publishing real-time northbound trading data for foreign capital, making it more difficult to gauge the withdrawal of foreign capital from China.
Wong said Western institutions generally do not understand the Chinese communist regime’s economic structure and often view it from the perspective of Western economics, rather than a perspective that acknowledges the hidden rules of “the operation of the socialist economy with Chinese characteristics.”
He said China’s real economic situation could be much worse than what the official data show, noting that “although the state-owned economy is still developing with a growing share of market monopoly, and some non-tax revenues are increasing, the private sector is deteriorating.” He said China’s current real underemployment rate could be more than 25 percent.
Sun Kuo-hsiang, professor of international affairs and business at Nanhua University in Taiwan, told The Epoch Times that international investment banks’ downgrading of their economic growth forecasts for China reflects the view that the Chinese economy is facing great challenges.
He said that although the official positive growth data show that some sectors of the economy, such as solar and photovoltaic panels, are still expanding, “some industries may have negative growth, and the actual economic situation may be worse.”
“Because China’s statistical data are often manipulated according to government policies, the growth data released by various provinces have the same problem,” Sun said.
He said CCP officials falsify data to avoid upsetting the regime’s leader, Xi Jinping.
“Therefore, under the current circumstances, the economic growth numbers may be more symbolic than substantive and cannot reflect the true situation of the Chinese economy at all,” Sun said.
W. Paul Chiou, professor at the Department of Finance at Northeastern University in Boston, told The Epoch Times that China’s private consumption accounts for less than 40 percent of the overall economy, compared with 70 percent in the U.S. economy.
“The largest share of China’s economy is investment, which is mainly made by companies with government connections, accounting for about 40 percent of the country’s economy,” he said.
Chiou said the latest data show that China’s investment and consumer confidence are both declining.
“Fixed capital investment in the first eight months was 3.4 percent, which means that China’s economy is in a serious state,” he said.
According to Chiou, it’s meaningless to use the economic growth rate as an indicator to study China’s development. Instead, it should be measured from the perspective of people’s welfare.
“What really matters to the well-being of the people is some social infrastructure, such as social security, care for the elderly, family support, helping the people’s livelihood, or improving the medical system and the education system,” he said.
Luo Ya and Reuters contributed to this report.