Macro-trend: The coming China-West numbers divide
by Chris Zappone
Aka…Moving the goalposts
Recent skepticism about Chinese export numbers points to what I think will become another area where China and the west part ways.
But to the export figures, first. They rose 14.1 per cent in December, to the disbelief of economists at Goldman Sachs, UBS and ANZ Bank, who said the monthly jump didn’t agree with the volumes of goods ship though ports to trading partners, as well as defying the movements of the manufacturing index.
As anyone who has watched China knows, this disconnect is hardly new. The Wikileaks data drop showed a Communist Party leader telling the US ambassador that Chinese statistics were “man-made.” Of course, global markets live and die by these numbers.
But over time, as China becomes even more central to the global economy, the credibility issues around their statistics may prove problematic for economies and policymakers reliant on China. No doubt the issues won’t be big enough to derail China’s eventual emergence as the largest economy in the world. And no doubt, the Chinese will celebrate when this milestone is reached.
But something is going on in the West that may sorely disappoint the Chinese when that does occur because it has to do with the very notion of a nation’s success, and should this change in the West fully take hold, it would deny Beijing the Pride of Being Number One.
There is an effort in advanced Western economies to move away from the gross domestic product as a measure of a nation’s standing. Instead, a so-called Happiness Index, devised by the Stiglitz-Sen-Fitoussi commission, appointed by then-French PM Nicholas Sarkozy in 2009 to devise a new measure of a society’s progress will appeal to both sides of the political spectrum in the West.
Environmentalists who blame the consumption-based approach to economic growth will embrace it, as it encourages a more balanced thinking about an economy’s relative success. Further, this may occur as the corruption of statistics continues in China, providing yet another signal that the GDP measure as the best measure of success has surely passed its use-by date.
Sadly, the Chinese economy will become the largest in the world on eternally surging GDP growth, with only suspiciously muted cycles. The numbers will be stunning, but increasingly minds in the advanced West will be looking at measures more suited to their economy’s relative out-performance.
While there is no guarantee it will pan out this way, the West, in its eternal ability to invent and innovate, will have an incentive to adopt these new measures and champion them.