The summer Davos blues
Schumpeter
By The Economist
From The Economist
Published: September 21, 2012
From The Economist
Published: September 21, 2012
Global movers and shakers are worried about China.
Sep 15th 2012 | from the print edition
THE World Economic Forum is a conference for optimists. Take Ashish Thakkar, a young businessman whose family fled Uganda in 1972 when Idi Amin expelled all the Asians and grabbed their shops. The Thakkars went to Britain, patiently rebuilt their fortunes and moved back to Africa in 1993. To Rwanda, as ill-luck would have it. The next year, during the genocide, they lost everything again. Most people would have given up on Africa at this point. Not Mr Thakkar. His companies now employ 7,000 people there, manning call centres and running farm projects. At the World Economic Forum in Tianjin in northern China this week, he eagerly touted Africa as a “new frontier of growth” (though he runs his empire from Dubai these days).
For decades the great and good of business and politics have gathered every winter in Davos, a Swiss ski resort, for the World Economic Forum, where they swap ideas about “improving the state of the world” and break ankles on icy pavements. More recently the forum has spawned mini-Davoses on other continents. The most successful is the “summer Davos” held annually in China since 2007. It is a great opportunity for big cheeses from the rest of the world to get to know their Chinese peers. In Tianjin, captains of industry slurped noodles with cabinet ministers, charity bosses bent plutocratic ears and “young global leaders” partied. But the mood was unmistakably gloomy.
Part of the problem is the euro crisis. But the biggest concerns are about China itself: its magnificent growth machine is slowing. Companies that had become used to double-digit GDP expansion must make do with 7.5% this year, if the official target is met. Imports in August actually fell, by 2.6% year on year. Behind closed doors, Chinese bosses fretted about bad debts and looming lay-offs. One warned of “a wave of brand elimination” in China’s car industry, as early as next year. People are accustomed to grim news from Europe; from China it is shocking.
What is all the fuss about? Annual growth of 7.5% is still pretty darn good. It alarms Davos Man, for two reasons. First, with growth nugatory or negative in the rich world, firms have come to depend on surging emerging markets, especially China, to keep expanding. Second, no one knows whether Chinese statistics are true. Is growth merely shifting down a gear. Or is it heading for a crash? In a one-party state, if the central government sets growth targets, local officials may view them as commands. To what extent do they falsify the numbers to please their superiors? The answer is as clear as the Tianjin skyline on a smoggy day.
Consider one indicator: electricity output. As Chinese statistics go, this is a fairly reliable one. Only a few companies generate electric power, and it can be metered in a way that dodgy cash transactions cannot. So here’s the bad news: in June China’s electricity output did not grow at all. In the two months before that, it grew by a feeble 2.7% and 0.7% respectively, year on year. Over the same period, industrial value-added was growing at a cracking 9%, said the statistics. “Is it really possible for a manufacturing-heavy economy like China’s to grow at a decent pace when electricity is not?” asks Nate Taplin of GK Dragonomics, a research firm, in a paper called “The Electricity Conundrum, Revisited”.
The numbers might be accurate. Mr Taplin notes that China’s heavy industries, such as steel, cement, and chemicals, use lots of power but generate only meagre profits. So the gap between electricity growth and industrial value-added “is not in itself enough evidence for large-scale data manipulation.” But the fact that serious economists are even asking this question points to a worrying truth: no other important country is as murky as China.
Foreigners have always been mystified by it, of course. Often this is simply because they haven’t done their homework. Late one night this week, your columnist met a young global leader who, after a happy drinking session, had wound up outside the wrong hotel. He had no Chinese cash and, speaking no Chinese, couldn’t make the taxi driver take him to a cash machine. Schumpeter paid his fare.
Out of sight
The real problem with China is not only that it is difficult for outsiders to understand. It is that it is difficult for locals, too. The big news story this week concerned Xi Jinping, the man who is set to become China’s leader in a few weeks. He has not been seen in public since September 1st. He cancelled meetings with Hillary Clinton and Singapore’s prime minister, citing back pain. Rumours are swirling that something is amiss (see Banyan). The businessfolk at summer Davos would like to know what is going on. Yet when Wen Jiabao, the prime minister, addressed the forum on September 11th, he didn’t mention the subject and took no questions from the floor.
The free flow of information fuels progress. Companies listen to their customers’ complaints in order to improve their products. Politicians in democracies listen to voters’ complaints and strain mightily to appease them. In China, by contrast, the most important grumbles are voiced only in private. Why, asked one young, foreign-educated entrepreneur, is China ruled by old men rather than laws? Why are Chinese people not allowed to choose between political parties? Why do officials with modest salaries wear such expensive watches?
As long as living standards keep rising, China will probably remain stable. The incredible growth engine will keep running, albeit at a slower pace, for years to come. The capitalists gathered in Tianjin salivate at the prospect of pushing beyond China’s richer coastal provinces and into the hinterland, where hundreds of millions of new consumers would love to buy a fridge and fancy food to put in it. They fear, though, that if growth stalls, all bets are off. And they worry that they won’t see the crash coming.
Economist.com/blogs/schumpeter
from the print edition | Business
©The Economist Newspaper Limited 2012
Sep 15th 2012 | from the print edition
THE World Economic Forum is a conference for optimists. Take Ashish Thakkar, a young businessman whose family fled Uganda in 1972 when Idi Amin expelled all the Asians and grabbed their shops. The Thakkars went to Britain, patiently rebuilt their fortunes and moved back to Africa in 1993. To Rwanda, as ill-luck would have it. The next year, during the genocide, they lost everything again. Most people would have given up on Africa at this point. Not Mr Thakkar. His companies now employ 7,000 people there, manning call centres and running farm projects. At the World Economic Forum in Tianjin in northern China this week, he eagerly touted Africa as a “new frontier of growth” (though he runs his empire from Dubai these days).
For decades the great and good of business and politics have gathered every winter in Davos, a Swiss ski resort, for the World Economic Forum, where they swap ideas about “improving the state of the world” and break ankles on icy pavements. More recently the forum has spawned mini-Davoses on other continents. The most successful is the “summer Davos” held annually in China since 2007. It is a great opportunity for big cheeses from the rest of the world to get to know their Chinese peers. In Tianjin, captains of industry slurped noodles with cabinet ministers, charity bosses bent plutocratic ears and “young global leaders” partied. But the mood was unmistakably gloomy.
Part of the problem is the euro crisis. But the biggest concerns are about China itself: its magnificent growth machine is slowing. Companies that had become used to double-digit GDP expansion must make do with 7.5% this year, if the official target is met. Imports in August actually fell, by 2.6% year on year. Behind closed doors, Chinese bosses fretted about bad debts and looming lay-offs. One warned of “a wave of brand elimination” in China’s car industry, as early as next year. People are accustomed to grim news from Europe; from China it is shocking.
What is all the fuss about? Annual growth of 7.5% is still pretty darn good. It alarms Davos Man, for two reasons. First, with growth nugatory or negative in the rich world, firms have come to depend on surging emerging markets, especially China, to keep expanding. Second, no one knows whether Chinese statistics are true. Is growth merely shifting down a gear. Or is it heading for a crash? In a one-party state, if the central government sets growth targets, local officials may view them as commands. To what extent do they falsify the numbers to please their superiors? The answer is as clear as the Tianjin skyline on a smoggy day.
Consider one indicator: electricity output. As Chinese statistics go, this is a fairly reliable one. Only a few companies generate electric power, and it can be metered in a way that dodgy cash transactions cannot. So here’s the bad news: in June China’s electricity output did not grow at all. In the two months before that, it grew by a feeble 2.7% and 0.7% respectively, year on year. Over the same period, industrial value-added was growing at a cracking 9%, said the statistics. “Is it really possible for a manufacturing-heavy economy like China’s to grow at a decent pace when electricity is not?” asks Nate Taplin of GK Dragonomics, a research firm, in a paper called “The Electricity Conundrum, Revisited”.
The numbers might be accurate. Mr Taplin notes that China’s heavy industries, such as steel, cement, and chemicals, use lots of power but generate only meagre profits. So the gap between electricity growth and industrial value-added “is not in itself enough evidence for large-scale data manipulation.” But the fact that serious economists are even asking this question points to a worrying truth: no other important country is as murky as China.
Foreigners have always been mystified by it, of course. Often this is simply because they haven’t done their homework. Late one night this week, your columnist met a young global leader who, after a happy drinking session, had wound up outside the wrong hotel. He had no Chinese cash and, speaking no Chinese, couldn’t make the taxi driver take him to a cash machine. Schumpeter paid his fare.
Out of sight
The real problem with China is not only that it is difficult for outsiders to understand. It is that it is difficult for locals, too. The big news story this week concerned Xi Jinping, the man who is set to become China’s leader in a few weeks. He has not been seen in public since September 1st. He cancelled meetings with Hillary Clinton and Singapore’s prime minister, citing back pain. Rumours are swirling that something is amiss (see Banyan). The businessfolk at summer Davos would like to know what is going on. Yet when Wen Jiabao, the prime minister, addressed the forum on September 11th, he didn’t mention the subject and took no questions from the floor.
The free flow of information fuels progress. Companies listen to their customers’ complaints in order to improve their products. Politicians in democracies listen to voters’ complaints and strain mightily to appease them. In China, by contrast, the most important grumbles are voiced only in private. Why, asked one young, foreign-educated entrepreneur, is China ruled by old men rather than laws? Why are Chinese people not allowed to choose between political parties? Why do officials with modest salaries wear such expensive watches?
As long as living standards keep rising, China will probably remain stable. The incredible growth engine will keep running, albeit at a slower pace, for years to come. The capitalists gathered in Tianjin salivate at the prospect of pushing beyond China’s richer coastal provinces and into the hinterland, where hundreds of millions of new consumers would love to buy a fridge and fancy food to put in it. They fear, though, that if growth stalls, all bets are off. And they worry that they won’t see the crash coming.
Economist.com/blogs/schumpeter
from the print edition | Business
©The Economist Newspaper Limited 2012
統計數字真相？中國讓全球擔憂
2012-09-21
Web only
作者：經濟學人
世界經濟論壇裡充滿了許多天性樂觀之人，但在今年的天津夏季達沃斯論壇裡，氣氛無疑十分沉重。部分問題在於歐元危機，但最大的疑慮則是出於中國本身；中國的強力成長正在走緩，就算到達官方目標，習慣了二位數字成長的企業，今年也得忍受7.5%的成長。
7.5%的年成長仍舊非常好，但達沃斯論壇參與者擔心的原因有二，其一，富有世界成長不佳，企業改倚賴新興市場以持續擴張；其二，沒有人知道中國的統計數字是真是假，成長真的只是減緩？還是即將崩潰？
以中國統計數據來說，電力產出算是相當可靠的數據，而中國7月的電力產出完全沒有成長，前二個月年成長僅達2.7%和0.7%。但同一期間，工業加值成長卻高達9%，而且中國是個十分倚賴重工業的經濟體。
不 過，經濟學家會有這樣的疑慮，本身就讓人擔心。資訊自由流通可以帶動進步。企業聆聽客戶的抱怨以改進產品，民主國家的政治人物聆聽選民的抱怨，並全力討好 選民；相反地，在中國，大部分不滿都只在私底下才會說出口。有位在西方接受教育的年輕企業家問道，為什麼中國是由老人、而不是由法律統治？為什麼中國人不 能選擇政黨？為什麼領取中等薪資的官員可以戴那麼貴的手錶？
只要生活水準持續提升，中國應該就能維持穩定；強大的成長機器應該還能繼續運轉好幾年，只是速度比較慢。天津論壇的參與者對中國內陸地區抱著極高期望，但他們也害怕成長停滯，因為那會讓一切成為空談；此外，他們還擔心自己無法預先知曉成長崩潰的來臨。（黃維德譯）
©The Economist Newspaper Limited 2012
經濟學人英文原文
以中國統計數據來說，電力產出算是相當可靠的數據，而中國7月的電力產出完全沒有成長，前二個月年成長僅達2.7%和0.7%。但同一期間，工業加值成長卻高達9%，而且中國是個十分倚賴重工業的經濟體。
不 過，經濟學家會有這樣的疑慮，本身就讓人擔心。資訊自由流通可以帶動進步。企業聆聽客戶的抱怨以改進產品，民主國家的政治人物聆聽選民的抱怨，並全力討好 選民；相反地，在中國，大部分不滿都只在私底下才會說出口。有位在西方接受教育的年輕企業家問道，為什麼中國是由老人、而不是由法律統治？為什麼中國人不 能選擇政黨？為什麼領取中等薪資的官員可以戴那麼貴的手錶？
只要生活水準持續提升，中國應該就能維持穩定；強大的成長機器應該還能繼續運轉好幾年，只是速度比較慢。天津論壇的參與者對中國內陸地區抱著極高期望，但他們也害怕成長停滯，因為那會讓一切成為空談；此外，他們還擔心自己無法預先知曉成長崩潰的來臨。（黃維德譯）
©The Economist Newspaper Limited 2012
經濟學人英文原文
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