Is China An Economic Miracle, Or One Massive Government-­Sponsored Fraud?

Is China an economic miracle, or one massive Government-­?sponsored fraud?

History has shown us countless times that centrally-­?planned, command style economies do not produce long-­?term economic growth. We’ve seen this will the Soviet Union, the UK, the US-­?since the Tech Crash, and today in China.

I realize that many would argue China has adopted free market policies with its “free market zones.” However, even this terminology reveals China is nowhere near a free, dynamic market (a free market is simply a free market, not a “zone.”).

Instead, China should be viewed through the lens of rampant corruption, fraud, and insider dealing that has seen a select handful get rich (usually those with close ties to the ruling party) via paper wealth (real estate and stock prices).

First and foremost, no Chinese economic data is even close to accurate. The reason for this, is that unlike the US in which GDP is measured using final sales, China simply counts any and all economic production as economic growth.

So, let’s say that China built a city. Regardless of whether any of the buildings are ever purchased or leased, China will count the entire city in its GDP growth. As one can imagine, this has highly incentivized China’s government to build “bridges to nowhere” or economic projects that are never actually used.

As a result the country is replete with ghost towns…

China’s ghost towns and phantom malls

“In Chenggong, there are more than 100,000 new apartments with no occupants,” according to the World Bank’s Holly Krambeck.

Designed as an overspill point for nearby Kunming, a city of nearly six-­?and-­?a-­? half million, Chenggong began to take shape in 2003.

High-­?rise apartment blocks have mushroomed but today it is still largely deserted after failed attempts by the authorities to attract new residents.

Matteo Damiani, an Italian journalist who worked for seven years in Kunming, has visited Chenggong several times, photographing empty tower blocks that loom over gigantic plazas, peopled only by enormous works of art.

He found a small community of students, workers and security guards but nobody else.

“The suburbs and even the city centre are empty,” he says. “You can find a big stadium, shopping malls and hundreds of buildings finished but abandoned.”

There is even an area for luxury villas that is totally abandoned, he adds. It is said to be one of the biggest ghost cities in Asia. http://www.bbc.co.uk/news/magazine-­?19049254

…as well as widespread economic fraud and counterfeiting:

Fraud, Culture and the Law: Can China Change?

Counterfeit goods and scams are used to defraud millions of Chinese daily.

This week alone, the country’s state media have reported the arrests of two men for fraud: one a high-­?profile real estate financier suspected of manipulating bids, the other a sales manager at milk producer Mengniu who reportedly tampered with production dates on milk and yogurt labels.

Those cases follow the announcement earlier this month by police that they had seized more than $182 million in counterfeit pharmaceuticals, including drugs used to treat diabetes and high blood pressure, as part of a nationwide crackdown on fake food and drugs. Drug counterfeiters “are coming up with new schemes, becoming craftier and better able to deceive” police warned in a statement accompanying the news.

The persistence and extent of fraud in China, despite a near constant string of crackdowns and arrests, raises fundamental questions about cultural forces in Chinese society that limit the reach of law…

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