Will Hong Kong Cut Taxes?



Posted by Ed 3 mths ago
“China is slashing business taxes as it tries to stop its economy from slowing down too sharply. The Chinese government on Tuesday predicted economic growth of between 6% and 6.5% in 2019. That’s a decline from last year’s 6.6% rate of expansion, which was already China’s weakest performance in three decades.”



Ed 3 mths ago
Brookings Says China Overstated Size Of Its Economy By 12%

According to Brookings, much of the manipulation in Chinese official government statistics takes place at the local level. In what the FT described as "a legacy of Maoist state planning", authorities in Beijing hand down growth targets to local officials, who use it to goalseek the official statistics they hand back.

"China’s national accounts are based on data collected by local governments. However, since local governments are rewarded for meeting growth and investment targets, they have an incentive to skew local statistics. China’s National Bureau of Statistics (NBS) adjusts the data provided by local governments to calculate GDP at the national level," the study's authors said.

Evidence of this is relatively obvious: Year after year, the sum total of China's provincial growth figures is larger than the unadjusted national figures reported by Beijing. Though central authorities accused three provinces of doctoring their data back in 2017, authorities have done little else to discourage the practice.

Inflated data in hand, China's National Bureau of Statistics struggles to adjust it, and though readings before 2008 were reportedly more accurate, more recently, the figures have been further off the mark, according to Brookings.

"NBS has done a lot of work to weed out the fake numbers added by local government, but it just doesn’t have enough power and capacity, nor the right incentives," Michael Zheng Song, economics professor at the Chinese University of Hong Kong and a co-author of the paper, told the FT. "It would be unfair to blame NBS for fabricating GDP numbers."

So, now that we've once again affirmed what many have widely suspected, what does this mean for US-China trade talks? Well, it would seem to confirm the argument made by an FT columnist earlier this week that President Xi has just as much to lose from a failed trade deal as President Trump.

Here are a few other conclusions from the paper:

Official data overstated growth of nominal GDP by an average of 1.7% per year between 2008 and 2016

This made the economy 12% smaller in 2016 than figured indicated

GDP growth in real terms was overstated by 2% over the same period

The paper's authors are more confident about GDP data in nominal terms versus real terms

Overstatement of industrial and investment output were the most severe

Data on consumption was found to be the most reliable

But with authorities anxious to suppress any information that would contradict their economic narrative,
we now wait to see whether Beijing will declare former Fed Chair and Brookings Institute economist Ben Bernanke (along with the study's authors) 'persona non grata'.


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