Archive for ‘Liaoning’

07/03/2019

China ‘exaggerated’ GDP data by 2 percentage points for at least nine years, new study says

  • Mainland has overestimated its nominal and real growth rates by about 2 full percentage points on average between 2008 to 2016
  • Calculations suggest that the current nominal size of the economy is about 18 per cent lower than the official level of US$13.4 trillion at the end of 2018

13 Feb 2019

The paper, “A Forensic Examination of China’s National Account”, was submitted to the “Brookings Papers on Economic Activity”, a journal published by the US-based Brookings Institute. Photo: EPA
The paper, “A Forensic Examination of China’s National Account”, was submitted to the “Brookings Papers on Economic Activity”, a journal published by the US-based Brookings Institute. Photo: EPA
China has overestimated its nominal and real growth rates by about 2 full percentage points on average between 2008 to 2016, with the miscalculation increasing each year, according to a new study published on Thursday.
The results indicate that the actual size of China’s economy at the end of 2018 was well below the government’s official estimate.
It also raises questions not only about the quality of economic data from the world’s second largest economy, but also the willingness of the government to take the steps necessary to accurately report information.
Using the study’s findings and applying them to government figures starting with the level of nominal gross domestic product (GDP) at the end of 2007 and the growth rate for 2008, calculations by the South China Morning Post show that the current nominal size of the Chinese economy is about 18 per cent lower than the official level of 90 trillion yuan (US$13.4 trillion) at the end of 2018.
The calculation assumes that the government’s official 2017 and 2018 nominal growth rates are overestimated by 2 percentage points, as suggested by the study.

Overestimates of growth in 2007 and previous years would further reduce the current size of the Chinese economy.

SCMP calculations show the adjusted nominal GDP level in China is about US$11.5 trillion using current exchange rates, still more than twice the size of Japan’s economy at US$5.16 trillion, but well below the economy of the United States at US$20 trillion.

The paper, “A Forensic Examination of China’s National Account”, was submitted to the “Brookings Papers on Economic Activity”, a journal published by the US-based think tank Brookings Institute twice a year on macroeconomic issues that are influencing the public policy debate. It will be formally presented in Washington on Thursday.
“Our estimates suggest that the extent by which local governments exaggerate local GDP accelerated after 2008, but the magnitude of the adjustment by the NBS did not change in tandem,” the authors said.

The study focuses primarily on nominal, non-inflation adjusted growth.

The paper comes at a sensitive time for Chinese policymakers, who are battling a slowing economy due to their campaign to reduce debt and risky lending as well as the effect of the trade war with the United States. The inflation-adjusted growth rate of 6.6 per cent last year was the slowest since 1990.

On Tuesday, the government announced that it had lowered its growth target for 2019 to a range of 6 to 6.5 per cent, down from “about 6.5 per cent” last year due to the multiple headwinds the economy is facing. The government also announced new tax cuts and additional government spending to help stabilise growth.
The paper’s four authors – Chen Wei, Chen Xilu and Michael Song from the Chinese University of Hong Kong and Chang-Tai Hsieh from the University of Chicago – used a mix of economic indicators that are less likely to have been manipulated by authorities to prove that the National Bureau of Statistics (NBS) have not done enough to correct the errors in the data collected from provincial governments over the past decade.

Our estimates suggest that the extent by which local governments exaggerate local GDP accelerated after 2008, but the magnitude of the adjustment by the NBS did not change in tandem.Report authors

It has long been believed that local Chinese officials inflate figures reflecting their economic performance, which is closely tied to their opportunity for promotion. Since 2003, the NBS has produced a national gross domestic product (GDP) figure that is lower than aggregate provincial data after examining other data such as the census and land sales.

Local statistics bureaus generally overstate industrial output as a portion of overall production as well as the size of investment within overall expenditures, the two different approaches to calculating GDP, according to the paper. The methods of data collection are often the cause, for example, calculations of investment spending have been based purely on government reports on specific projects rather than on the financial statements of the investing firms involved.

One method that the authors used to probe the accuracy of the NBS’s adjustments was comparing the growth of official GDP with the growth of revenue from value-added tax (VAT), which taxes the value added to a product at each stage of production.

Local governments have fewer incentives to manipulate VAT revenue, since a large portion of it is eventually transferred to the central government, therefore overstating VAT would only increase fiscal revenue losses.

Premier Li Keqiang confirmed China had lowered its growth target for 2019 to a range of 6 to 6.5 per cent at the National People’s Congress on Tuesday. Photo:
Premier Li Keqiang confirmed China had lowered its growth target for 2019 to a range of 6 to 6.5 per cent at the National People’s Congress on Tuesday. Photo:

Although the NBS adjusts downwards local statistics, it does not report the adjusted local statistics, perhaps out of a desire to not confront powerful local leaders.Report authors

“Although the NBS adjusts downwards local statistics, it does not report the adjusted local statistics, perhaps out of a desire to not confront powerful local leaders,” the authors said.

Since September, the NBS has named and shamed local governments on its website for manipulating data, but it remains to be seen if local governments fall in line.

In a post in January, the NBS said it had passed 14 cases of data falsification on to local governments before February 2018 but that it had not been updated even though local officials are required by law to punish those responsible for manipulating data within six months after receiving a notice of a violation.

The NBS’s ability to fix China’s GDP data problem is bound by its limited political power, the authors indicated.

“There are three problems with China’s GDP. One is that it doesn’t necessarily measure the right thing. Two is statistical bias in the way data is collected. Three is really a macro policy problem by the government which should write down all the bad debt,” said Michael Pettis, professor of finance at Peking University.

“The NBS is only trying to fix the second problem.”

Source: SCMP

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01/03/2019

Chinese navy’s 70th birthday parade set to showcase country’s rising sea power

  • Next month’s nautical spectacle will allow country to show off its most advanced warships to an international audience
  • More than a dozen foreign navies are expected to join in, including the United States

Chinese navy’s 70th birthday parade showcases rising sea power

1 Mar 2019

Chinese warships pictured at the end of joint exercise with the Russian navy in 2016. Photo: Xinhua
Chinese warships pictured at the end of joint exercise with the Russian navy in 2016. Photo: Xinhua
China will hold a naval parade next month to mark the 70th anniversary of the founding of the People’s Liberation Army Navy and will invite more than a dozen of foreign navies to participate.
The parade will take place on April 23 in the Yellow Sea off the coast of Qingdao in Shandong province, Ren Zhiqiang, a spokesman for the Ministry of National Defence, said on Thursday.
Ren did not provide further details of the parade but military analysts said the exercise would give the navy the opportunity to display its rapidly growing strength and show how that has increased in the past 12 months.

In April last year a naval review in the South China Sea featured a total of 48 vessels and 76 planes, including China’s first aircraft carrier, the Liaoning, its Type 094A and 095 nuclear submarines, 052D guided missile destroyers and J-15 fighter jets.

The experts expect that next month’s event will provide a showcase for several new and more powerful vessels including its home-grown aircraft carrier Type 001A, the Type 055 – Asia’s most powerful destroyer – and several nuclear submarines.

“The fact that China is holding the naval parade just one year after the South China Sea review shows the great importance [the leadership] attaches to the development of China’s maritime interests, the navy and its expansion,” navy expert Li Jie said.

Chinese President Xi Jinping joined the crew on the deck of the cruiser Changsha following last year’s naval review. Photo: Xinhua
Chinese President Xi Jinping joined the crew on the deck of the cruiser Changsha following last year’s naval review. Photo: Xinhua

China also held a major naval parade in 2009 to mark the navy’s 60th anniversary.

It was smaller in scale than the upcoming extravaganza with 25 PLA vessels and 31 fighter jets taking part.

Fourteen foreign navies sent ships to the 2009 parade, including the USS Fitzgerald from America and the guided-missile cruiser Varyag from Russia. France, Australia, South Korea, India and Pakistan also joined in the event.

More foreign countries are expected to join the party this year as the PLA has become more active internationally and China has sold more warships to foreign navies.

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“The parade is more like a birthday party for the PLA Navy and the participation of foreign navies is a matter of diplomatic courtesy with few military implications,” said Yue Gang, a former PLA colonel.

Yue said the US and its allies would attend despite the rising tensions between the two sides.

Since 2015 the US and Chinese navies have engaged in a series of confrontations in the South China Sea as China strengthens its military presence in the region and the US has sought to challenge Beijing’s claims to the waters by conducting what it describes as “freedom of navigation” operations.

“I don’t expect they will send any of the warships that have taken part in such operations [to the parade],” Yue said.

China has greatly expanded its naval capabilities in recent years. Photo: AP
China has greatly expanded its naval capabilities in recent years. Photo: AP

It has been reported that the Japanese Maritime Self-Defence Force has expressed an interest in joining the parade and the Philippines – which has a rival claim to the South China Sea – is planning to send a vessel to the event for the first time.

Li said militaries such as the US and Japan would not want to miss the chance to observe the PLA Navy closely.

“In addition, greater transparency [through the parade] will also help reassure smaller regional partners such as the Philippines that China is a friendly power despite its growing military strength,” he said.

China held its first naval parade in 1957 and April’s display will be the sixth such event.

Sailors also took part in the parade through Tiananmen Square to mark the foundation of the People’s Republic on October 1 1949.

Source: SCMP

26/02/2019

‘No-go zone’ in Yellow Sea for Chinese aircraft carrier sea trials

  • Liaoning has just undergone a nine-month revamp
  • Flight system of new warship the Type 001A expected to be put to test

‘No-go zone’ in Yellow Sea for Chinese aircraft carrier sea trials

26 Feb 2019

China’s first domestically built aircraft carrier, the Type 001A, will undergo major tests as it enters the final phase of preparations before it is commissioned. Photo: Reuters
China’s first domestically built aircraft carrier, the Type 001A, will undergo major tests as it enters the final phase of preparations before it is commissioned. Photo: Reuters

China has announced a “no-go zone” in the Yellow Sea while sea trials are carried out for two of its aircraft carriers – the Liaoning, which has just been upgraded, and its first domestically built carrier.

The Liaoning Maritime Administration said there would be no entry to the area off China’s northeast coast from Sunday to March 6, and it would be used for “military purposes”.

State media reported that the Liaoning, which was commissioned in 2012, left the Dalian shipyard on Sunday after nine months of maintenance and modifications. Photos showed a banner where the warship was docked reading “Congratulations to the Liaoning on its new mission”.

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Meanwhile, the Type 001A aircraft carrier, which was built at the same shipyard, is expected to undergo major tests at sea as it enters the final phase of preparations before it is commissioned.
Naval expert Li Jie said the Liaoning would probably also undergo testing, but he expected the no-go zone would mainly be for the Type 001A, especially to put its flight system to the test.

“This vessel will soon enter service and in preparation for that it has to go through a number of manoeuvres, take-offs and landings with the ship-based aircraft,” Li said.

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The warship appears to be ready for operations involving those aircraft, according to a report on news website Guancha.cn. Photos showed three blast deflectors – which protect the deck and crew from jet engines – on the Type 001A flight deck, along with trucks to tow planes and fire engines, the report said.

The vessel has undergone four sea trials since it was launched in April 2017.

China’s first and only active aircraft carrier, the Liaoning, was likely to carry out exercises involving J-15 fighter jets to get it combat-ready after its revamp, according to Li.
He expected both aircraft carriers to take part in the PLA Navy’s fleet review to be held off Qingdao, in Shandong province, on April 23 to mark the anniversary of the navy – part of a series of activities to commemorate the 70th year since the founding of the People’s Republic of China.
“They will both be at the event if the tests of the Type 001A go well. If not, the Liaoning will be there at least,” Li said.
After a fourth sea trial, China’s Type 001A aircraft carrier may go into service within month.
The Liaoning went back to the Dalian shipyard in May and has had its bridge and air traffic control centre rebuilt and radar system upgraded. The flight deck was also modified.
China bought the vessel from Ukraine in 1998 as an unfinished Soviet Kuznetsov-class carrier, the Varyag. It was retrofitted between 2006 and 2011. China’s first domestically built aircraft carrier, the Type 001A, was based on the 50,000-tonne vessel.
Source: SCMP
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