In one of the most straightforward interviews on China I’ve ever read, Anne Stevenson-Yang, a director at a research firm with almost 30 years of experience in the country, gives a blunt and dire take on China and its problems. It’s far more dire than the usual news and views about China, though the slowing property market and economy have raised concerns.
What’s good is she goes beyond that such as calling out international media for being too one-sided with their portrayal of Xi, who’s perceived as powerful and confident.
Her first point is extremely straightforward – “China, for all its talk about economic reform, is in big trouble.”
This, she says, stems from massive overinvestment in infrastructure and industrial overcapacity, which then led to rises in bad debt and credit growth.
However, the most impressive point is when she says Chinese economic data is tremendously inaccurate, to the extent that the economy might be one-third smaller than what it’s recorded as. This is in stark contrast to the hyped coverage over the recent IMF data that states China is the world’s top economy (by purchasing power parity and not exchange rates), which she disparages.
Interviewer: How bad can the situation be when the Chinese economy grew by 7.3% in the latest quarter?Stevenson-Yang: “People are crazy if they believe any government statistics, which, of course, are largely fabricated.”
Regarding the Chinese home market, she has this to say (which does explain a bit why prices are skyhigh in major cities).
“The Chinese home real estate market, mostly units in high-rise buildings, is truly bizarre. Many Chinese regard apartments as capital-gains machines rather than sources of shelter. In fact, there are 50 million units in China that are owned but vacant. The owners won’t rent them because used apartments suffer an immediate haircut in value.
It’s as if the government created a new asset class that no one lives in.”
The interview also covers capital flight, which has been very significant, and why China’s massive foreign exchange holdings are not that impressive a tool. It’s a very interesting read with a lot of points that may seem obvious but which are not often presented in media coverage of China.
She’s a well-known Western expert on China, but she’s also married to a mainlander, first arrived in the country in 1985, and knows a lot of party officials and leaders (which does make her criticisms seem very daring), so she clearly has strong connections to China.