Truth About China's Finances Slowly Seeping Out

Larry Lang is the chair professor of Finance at the Chinese University of Hong Kong. If he says that China's finances are in a difficult position, outsiders should pay attention. Keep in mind that these incendiary remarks were made in a session where all forms of filming or taping were strictly forbidden:

In the unusual, closed-door lecture, Lang gave a frank analysis of the Chinese economy and the censorship that is placed on intellectuals and public figures. “What I’m about to say is all true. But under this system, we are not allowed to speak the truth,” he said.

Despite Lang’s polished appearance on his high-profile TV shows, he said: “Don’t think that we are living in a peaceful time now. Actually the media cannot report anything at all. Those of us who do TV shows are so miserable and frustrated, because we cannot do any programs. As long as something is related to the government, we cannot report about it.”

...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.

Once the “economic tsunami” starts, the regime will lose credibility and China will become the poorest country in the world, Lang said. _ET

Apologists for the communist regime's finances have not been silent, attempting to portray Lang as a sensatinalist and a rabble-rouser. If that were the case, why would he insist that no taping or filming be allowed for his closed-door presentation?

Brian Wang has a somewhat contrary view from Lang's here: Lang Xian ping claims a depression has started in China

It is important to understand and acknowledge that the Chinese communist government is a police state which carefully controls as much information coming out of China as possible. China jails political prisoners, uses them for organ donours, and executes them if the person is obscure and little known outside the country.

Like Russia, China has never had a stable representative democracy. China has always cycled from insurrection to warring fiefdoms to empire and back again. No one really knows how long the current empire can last.