China: 20% Bigger Than We Thought?

The Chinese economy could be 20% bigger than previously estimated. Since almost everything about Chinese data should have ‘best guess’ status, this probably hardly comes as a surprise, and indeed the estimate itself should be treated with the customary caution, but yes, that is the conclusion which is apparently being drawn from the latest national economic census conducted by the National Bureau of Statistics earlier this year.

A spokesman for the National Bureau of Statistics said on Tuesday it will announce the findings of the census and its impact on the calculation on gross domestic product at a press conference next week.

The NBS refused to say by how much it would revise the GDP figures, but it is expected that the new measure will show the economy is larger by about 20 per cent.

Also in the news, China has now become the world’s largest exporter of information and communication technology goods, according to an OECD reported out today

China overtook the United States in 2004 to become the world’s leading exporter of information and communications technology (ICT) goods such as mobile phones, laptop computers and digital cameras, according to OECD data.

China exported USD 180 billion worth of ICT goods in 2004, compared with U.S. exports in the same category valued at USD 149 billion. In 2003, the U.S. led with exports of ICT goods worth USD 137 billion, followed by China with USD 123 billion.

China’s share of total world trade in ICT goods, including both imports and exports, rose to USD 329 billion in 2004, up from USD 234 billion in 2003 and USD 35 billion in 1996. By comparison, the U.S. share of total world trade stood at USD 375 billion in 2004, USD 301 billion in 2003 and USD 230 billion in 1996..

Evidently China is still on the up and up, and rather faster than we anticipated. As well as being the number one exporter of ICT equipment, China is also the world’s number one investor, as Stephen Roach reported a few days back:

Despite its relatively small share in the global economy — only about 5% of world GDP (at market exchange rates) — China now spends more on fixed investment than any country in the world. In dollar terms, China’s fixed asset investment was running at an annual rate of close to $1,100 billion in the first three quarters of 2005 (at market exchange rates) — in excess of annualized 2005 investment totals in the US ($987 billion), Japan ($733 billion), and the Euro-zone ($651 billion). If China’s investment boom remains unchecked and its currency continues to appreciate, its dominance in shaping the global investment cycle will only grow.

The Danish Job

This is really a hybrid post, although perhaps the unifying theme – for reasons which should be clear by the end – is Denmark.

In the first place Danish journalist Kjeld Hansen has a hard-hitting article in EU Observer about just what does actually happen to all that money paid-out in the form of agricultural subsidies (hat tip New Economist), whilst in the second one there is news today that the Commission is preparing a position paper on the EU’s social model for discussion at the October 27/28 summit.
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Killer Identities

Sorting through some old books yesterday, I came across one from Amin Maaloof that I hadn’t looked at in years. So I dusted it off, and started thinking about this post.

The English title of the book is “In the Name of Identity“, but the French title “Les Identit?s meurtrieres” (Lethal Identities?) or the Catalan one ‘Indentitats que Maten’ (Killer Identities) are much more expressive and to the point.
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Something Worries Me About Peter Bofinger

Really I realise I have been remiss in another important sense. I have long assumed that in fact the decision to reduce deficits was taken due to the coming fiscal pressure from ageing. This certainly was the background to the discussion. However now I look at the details of the SPG this area is not mentioned (as far as I can see) and the other – the free rider and associated – is the principal consideration.

So those who criticize the bureaucratic and infexible nature of the ECB are in the right to this extent. Of course the underlying demographics *should* be part of the pact, but that is another story.

I find myself in a tricky situation, since I am deeply sceptical that the euro can work, and now after the French vote even more so, but since it has been set in motion, the best thing is obviously to try and make it work (even while doubting). So I am thinking about all this. Obviously I should try and write a longer post making this clearer.

The SGP was adopted at the Amsterdam Council 1997. A history of the implementation of the pact, and a summary of the debate over the new pact can be found here. The Stability and Growth Pact was designed as a framework to prevent inflationary processes at the national level. For this purpose it obliges national governments to follow the simple rule of a balanced budget or a slight surplus.

Now if we go back to the origins of the pact, to the communication of the European Commission on 3 September 2004, you will find the following:

“As regards the debt criterion, the revised Stability and Growth Pact could clarify the basis for assessing the “satisfactory pace” of debt reduction provided for in Article 104(2)(b) of the Treaty. In defining this “satisfactory pace”, account should be taken of the need to bring debt levels back down to prudent levels before demographic ageing has an impact on economic and social developments in Member States. Member States’ initial debt levels and their potential growth levels should also be considered. Annual assessments could be made relative to this reference pace of reduction, taking into account country-specific growth conditions.”

Now curiously I have found nothing in Bofingers argument which seems even to vaguely recognise this background.

A good starting point for this topic would be the conference “Economic and Budgetary Implications of Global Ageing held by the Commission in March 2003.

The European Council in Stockholm of March 2001
agreed that ?the Council should regularly review the
long-term sustainability of public finances, including the
expected strains caused by the demographic changes
ahead. This should be done both under the guidelines
(BEPGs) and in the context of the stability and
convergence programmes.?

This document on the history of EU thinking on ageing and sustainability is incredible.
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On Predictability.

While the entire world is admiring Londoners for their ability to not let the terror destroy their way of life, while London mayor Ken Livingston is taking the Tube each morning, because not doing so would prove the terrorists strategy right, the British government is reinforcing its ongoing quest to get hold of as much information about citizens as possible. I’d call it “opportunistic”, they’d call it “concerned”.
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Subsidiarity To The Rescue?

The wrangling continues. To the world this must present a pretty unedifying spectacle of day-to-day political life here in the EU.

Italy has now threatened to use the veto, Peter Mandelson (taking time out from advising the US on how to handle China) asks Blair to think again, Blair himself is on a whilstlestop, and the whole question of how to handle Turkey admission is – like the proverbial hot potatoe – rapidly moving from one hand to the next.

Yesterday the euro – reeling from the referendum and the ECB rate crisis, went bobbing up and down like a yo-yo, and all in all we’re having a ‘very happy time of it’.

What the EU needs now is some short term success, some visible signs that things actually work, some ‘baby steps’ even.

Well one possible area where things could advance, and to everyones pleasure, might be related to the so-called ‘early warning system’ contained in the Consitution Treaty. Ian Cooper explains:
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‘Those Politicians’

Last Monday I had some ironing to do. Then I remembered that television still has one advantage over surfer-blogging: you can do the ironing at the same time. Of course the upcoming referendum was on several channels. I could not stand more than 20 minutes of it though (neither the ironing nor the tv). The various program presenters seemed to want to make it look like this was a political *debate as usual*, or so it seemed. National politicians dominated the guest lists. And most of them did what we expect from them nowadays: instead of seriously and conscientiously considering arguments, the majority of them seemed more intent on achieving a high score in something resembling a high-school debating-contest. Television comes in handy here.

In fact one of these *debates* was actually organized like a contest. Six politicians were invited. On every issue two of them went into a direct confrontation and the 6-minute sessions were immediately followed by a ‘flash vote’. And the winner is…
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More Statecraft In Action?

Condoleezza Rice
Colin Powell, who in all likelihood will renounce to using the phrase “between a rock and a hard place” for the rest of his life, is leaving the US administration, and Condoleezza Rice, currently US National Security Advisor, has been nominated by President Bush as next Secretary of State. Many in Europe, Deutsche Welle, I don’t think it matters if Powell’s departure strengthens hardliners who are insensitive to European sensitivities. Both European and American leaders have by now realized the need to work together, and they have – somewhat – adjusted their sensoric system and significantly reduced their mutual expectations. Pessimists may lead unhappy lives, but at least they are less likely to be disappointed.
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Another Brick In The Wall.

The Berlin Wall.
To be sure, this was a busy week for the German Chancellor, Gerhard Schroeder. In addition to the obligations caused by a state visit of Queen Elizabteth II, which, not unexpectedly, took place in an atmosphere of tabloid turmoil on both sides of the channel, the autumn European summit in Brussels, and the political digestion of the US election, he managed to upset pretty much everyone in political Germany – and beyond ( – with the most bizarre proposal to – sort of – abolish the German national holiday, October 3, in order to boost GDP growth and, as a consequence, eventually meet the fiscal criteria set out in the stability and growth pact.
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