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Is China Greece?

That’s a Chinese-language special report on an off-the-record speech given by Lang Xianping (“Larry Lang”), a Chinese economist and academic who used to host a TV show, but who was forced off the air because, according to the government, his Mandarin language skills weren’t up to par. Others believe it’s because he said things that […]

That’s a Chinese-language special report on an off-the-record speech given by Lang Xianping (“Larry Lang”), a Chinese economist and academic who used to host a TV show, but who was forced off the air because, according to the government, his Mandarin language skills weren’t up to par. Others believe it’s because he said things that the government wished no one would say.

Our commenter Pyrrho sends this account of the October 22 speech Lang gave — this, after demanding that no one record it — in which he argued that China is actually on the verge of bankruptcy, but few people know it because the Chinese government is hiding statistics and suppressing the information. This report, I should say, is from the Epoch Times, a publication funded by the Falun Gong movement, which is persecuted by the Chinese government. Nevertheless, the entire speech is available on YouTube if you want to see it (and can understand Chinese; the embed above is a news report about the speech, including excerpts; it’s subtitled in English). From the Epoch Times:

Lang’s assessment that the regime is bankrupt was based on five conjectures.

Firstly, that the regime’s debt sits at about 36 trillion yuan (US$5.68 trillion). This calculation is arrived at by adding up Chinese local government debt (between 16 trillion and 19.5 trillion yuan, or US$2.5 trillion and US$3 trillion), and the debt owed by state-owned enterprises (another 16 trillion, he said). But with interest of two trillion per year, he thinks things will unravel quickly.

Secondly, that the regime’s officially published inflation rate of 6.2 percent is fabricated. The real inflation rate is 16 percent, according to Lang.

Thirdly, that there is serious excess capacity in the economy, and that private consumption is only 30 percent of economic activity. Lang said that beginning this July, the Purchasing Managers Index, a measure of the manufacturing industry, plunged to a new low of 50.7. This is an indication, in his view, that China’s economy is in recession.

Fourthly, that the regime’s officially published GDP of 9 percent is also fabricated. According to Lang’s data, China’s GDP has decreased 10 percent. He said that the bloated figures come from the dramatic increase in infrastructure construction, including real estate development, railways, and highways each year (accounting for up to 70 percent of GDP in 2010).

Fifthly, that taxes are too high. Last year, the taxes on Chinese businesses (including direct and indirect taxes) were at 70 percent of earnings. The individual tax rate sits at 81.6 percent, Lang said.

Lang went on to say that every province in China is Greece. Reuters, by the way, has a fairly worrying analysis of the debt problem in China. How do you say “massive bubble” in Mandarin?

The greatest risk from a China economic depression is internal stability. This is the perennial problem in China. I recall back during the Tiananmen Square protests, which occurred just as I was starting my newspaper career, I researched China, and learned how deeply worried the Beijing government was about the potential for civil war — and how this is an age-old concern of Chinese governments. A couple of years ago, a Chinese immigrant friend told me that Americans had little idea how unstable China was. All we see are huge building projects and a booming economy. What we don’t see, because the government won’t let anyone see, is how fragile it all is, sustained by a corrupt and unaccountable authoritarian regime that doesn’t recognize the rule of law, and that steamrolls anyone who gets in its way. She said every Chinese abroad who is in touch with family back home knows this.

Of course I have no way of verifying that, so take this anecdote for what it’s worth. If any readers can vouch for her statement, or can knock it down, please speak up.

So let’s see: if Italy defaults, there goes the Eurozone, which almost certainly means there goes the North American economy, which almost certainly means there goes the export-based Chinese economy. In China, given the social fracturing there, could we see internal war, or revolution, in that country? One can hardly imagine what that would be like in a heavily armed nuclear power. What would Beijing be willing to do to rally nationalist sentiment behind its rule? Attack Taiwan? Our ally, which we are pledged to defend?

UPDATE: Via Sullivan, how exciting for us:

A lack of young women – a result of the skewed rate of baby boys born under China‘s one-child policy – means an estimated 30 to 50 million men will be without a wife in 20 years.

All those frustrated men, with no wives and, if the Chinese economy collapses, no way to earn money. Oh boy.

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