Yesterday 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
is insufficient. Based on this problem Miller has suggested 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?