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Slow Down China

the-book-on-china1Yesterday Leland Miller, President of China Beige Book International, spoke at Washington and Lee in a lecture called, “Demystifying China’s Economy in 2015”. Miller began his talk by claiming definitively that using GDP to measure China’s economy is a bad idea. He attested that GDP is a political number with a political narrative based on the story that the government wants to tell. It is both transparent and lagging data and does not tell us what we need to know about the country’s economy. Essentially the official data put out by the Chinese government isare insufficient. Based on this problem Miller has suggestedmarkets a solution he has created called the China Beige Book. He adapted the process from a similar program run by the US Federal Reserve for the United States. Essentially, through independent research, surveys and interviews, the China Beige Book attempts to get real on-the-ground data. The goal is to  provide more reliable data on the Chinese economy and Right now they are the only ones doing this. Throughout his talk Miller looked to squash three misconceptions that many people have about China and its economy. The first is that the GDP target is real. He posits that the number doesn’t actually mean anything and we should ignore the target. The second is that lower growth necessitates stimulus as people believe they can and should be growing at 8% forever. The third misconception is that stimulus works. Despite a large bank lending binge stimulus is not producing the effects that are intended.

Overall Miller pointed us towards a few key themes from 2014 and spoke about the worst and best scenarios for china in the future. The worst case scenario: China slows down. The best case scenario: China slows done. It will be in the way that they slow down that will dictate their future. If they keep lending out more money and keep expanding credit it may lead to a “hard landing” for the country. Though, in Miller’s opinion if we look at this through China’s data we may never know.

What do you think about the China Beige Book?


  1. 1. Using our Solow model, and knowing [at least now!] that due to (past) low birth rates China’s working-age population is falling, what would you predict for China’s GDP?

    2. Even in the US, the “flash” GDP estimate is subject to large revisions, by which time they provide a one-dimensional picture of behavior 6 months earlier. If you have data from the CBB, won’t that give you an advantage over rivals who focus on GPD hence are out of touch with (i) current economic trends that are (ii) specific to their industry?

  2. HeeJu HeeJu

    I am interested to learn whether Mr. Miller provides an alternative method to gauge and assess economic performance of China. I mean, GDP is not a perfect measurement (and many economists do agree since the literally one of the first things you are taught in MacroTheory is how ‘im’perfect GDP is), but it is a fairly appropriate method. So what’s his take on that? Secondly, China right now is in a way slowing down. I wish you could describe more about how China’s economic stagnation can mean both good and bad news.

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