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Tomorrow, the Chinese government will report how well their economy did in the second quarter. We all know the economy in China is booming, but these government reports are wildly inaccurate. You can basically choose any number you want. Ten percent? Fine. Eleven point three? Sounds good to me.

The GDP reports from our own government are pretty bad. But this time, I think this Chinese GDP report is worth watching. It’ll be interesting to see what the government is willing to admit. I tend to think that the Chinese economy is a lot weaker than most people think.

You have to ignore what the government says, and look for other signs. For example, Huang Power, a huge Chinese power producer, said that profits are going to be down 30%–40% for the first half this year. Also, the cost of shipping goods like iron and coal has plunged recently.

The U.S. is putting a lot of pressure on China to revalue the yuan. If China doesn’t move, the Senate wants to slap a huge tariff on Chinese products. For now, Greenspan has gotten the Senate back off. Apparently, a revaluation is coming soon. But if the Chinese economy isn’t do well, that could put any monetary reform on hold.

Posted by edelfenbein at July 19, 2005 10:04 AM