Alongside Rhodium's weaker estimation for 2023, the firm's forecast for 2024 sits at 3%-3.5% as part of a broader structural slowdown China's economy has entered following years of double-digit growth.

"We think the economy [in 2024] will look better than last year, but nothing like the pre-COVID growth rates that an improvement on China's official figures would imply," the firm said, with the caveat that greater than expected government stimulus could bring an unforeseen boost.

Assessing the state of an economy without using government data is done through various ways, including tracking indirect signs such as air pollution or nighttime luminosity in cities.

One popular method grouping electricity usage, rail cargo and bank loans came to be known as the "Li Keqiang index," named for the metric preferred by the late premier as a gauge of the country's growth.

A group of 16 economists from within and outside of China surveyed by Chinese financial news provider Caixin estimated an average of 5.3% growth for China's 2023 GDP, in line with Beijing's number. The International Monetary Fund projected China to grow at 5% in its most recent world economic outlook from October.

"I tend to think it's relatively accurate," said Nicholas Lardy, a senior fellow with the Washington-based Peterson Institute for International Economics. "There's a wealth of data released [this week], and in my view, it all hangs together," he said, arguing that a substantial leap in disposable household income helps explain the spike in consumption.

That could be a positive sign for 2024, as China's economy is expected to slow without the rebound seen in 2023 from removing COVID restrictions. The IMF forecasts the economy to grow at 4.2%.

Shares fell in Shanghai and Hong Kong following the official data release on Wednesday, and Hong Kong's Hang Seng Index closed Friday down 5.8% on the week.

Rhodium Group, a research firm with a focus on China, was particularly dubious of the official growth number, calling it "irreconcilable with evidence of general malaise and reactive policymaking that has piled up all year long." Rhodium estimated the actual growth figure as closer to 1.5%.

Doubts about the reliability of China's official economic data are not new. Capital Economics' China Activity Proxy gauge -- which attempts to track the economy by other components, including freight and passenger traffic, car sales and service sector electricity usage -- suggests actual growth has undershot Beijing's announcements since the start of 2022. But not all observers share Rhodium's low assessment.

Questions over the official 5.2% figure stem largely from whether the consumption boom was enough to offset the drags on China's economy.

"I think the skepticism inside China and outside China about the official data seems widespread and justified," said Scott Kennedy, a senior adviser and Trustee Chair in Chinese business and economics at the Center for Strategic and International Studies in Washington.

Stronger than expected growth numbers help create a sense of economic momentum, which encourages private investment and household consumption, Kennedy said, but "the business community and investors in China are not convinced China has turned the corner."

Before COVID, the business community gave the government the benefit of the doubt on this data partly because of the obvious and substantial growth occurring year after year, Kennedy said.

"That ambiguity is now typically interpreted in the other direction," he said.

How reliable is China's GDP data? 2024 in focus after debatable 2023

NEW YORK -- Doubts have swirled around China's official 2023 economic growth figures published this week, as some analysts struggle to reconcile government data with their own assessments.

China's gross domestic product grew 5.2% last year, the National Bureau of Statistics reported Wednesday, in line with Beijing's target of "around 5%." The figure represents an improvement from 3% in 2022, when the country was restrained by strict zero-COVID policies.

Lifting those restrictions helped spark a rebound in consumption as China's consumers returned to shops, restaurants and hotels. But the country's ongoing property crisis -- and a decline in exports, the first in seven years -- hampered growth.

Chinese Premier Li Qiang gave a sneak peek at the 2023 figure during his speech at the World Economic Forum's annual meeting in Davos, saying China had met its target without "massive stimulus."

Li’s second step is to extend the duration of debt, something that is under way through a variety of swap programs—some at the local level and some involving the central bank.

The third component, however, would require a significant ideological shift. That would involve selling off state assets. In Japan, that was one component of the eventual solution to its own bad-debt mountain under Prime Minister Junichiro Koizumi, in the years before the global financial crisis. (A policy option Tokyo is looking at again.)

But far from embracing privatization, Xi’s regime has tilted instead toward elevating the role of the state. It seems hard to envision a dose of 1980s Thatcherism to reduce debt and energize the private sector.

Which all magnifies the risk of a dynamic in China’s financial system that limits the economy’s potential in coming years.

First would be to have the central government simply take over part of the local authorities’ obligations. There have been signs in recent months that President Xi Jinping’s team is indeed thinking along these lines, though policymakers in Beijing have long sought to maintain the central government’s relatively low debt-to-GDP ratio.

Li argues that there’s a three-part solution for China’s local debtload, which his analysis showed amounted to 88% of gross domestic product as of 2020. That’s notably larger than previous estimates by the International Monetary Fund. (It would have been all the bigger in Li’s worst-case estimate of $14 trillion worth of debt.)

China’s benchmark 10-year government bond yields this week approached the modern record low of under 2.5%—hit during the initial Covid-19 crisis. In Japan’s case, 10-year yields sank through 2.5% in 1997 and never looked back.

It’s no coincidence that these days China’s interest rates are also heading south. This newsletter noted last year how lower rates on savings accounts risked undermining confidence among Chinese households. Late last month, China’s big state banks cut those rates further.

China, which claims the self-governed island of Taiwan as part of its territory and insists that it will be brought under Beijing’s control, has long voiced its opposition to the pro-independence DPP and viewed Lai and his running mate Hsiao Bi-khim with deep apprehension and mistrust. Now, China is rebuking any nation that dares to pay respect to Lai for his victory—or even to Taiwan for its successful democratic process.

Another piece of Japan’s response was to keep lowering interest rates to encourage new borrowing to fund new investments. The trouble with that was the appetite to extend or take on new credit was limited. Low rates came to be seen as a symptom of Japan’s diminished potential.

China's Long-term Economic Outlook Weakens
Bloomberg Economics sees GDP growth slowing more than previously thought

In much the same way, Japan’s economic growth by the 1990s was insufficient to simply pay off the mountain of debt created during the bubble years, based on real-estate collateral valued at entirely unrealistic prices. Tokyo’s response was to guide banks into offering companies forbearance, and avoiding US-style bankruptcies with all the social and labor carnage they entail.

The research also determined that the fiscal wherewithal of local authorities to service their debt had deteriorated by 2020. The conclusion: “It’s clear that local governments are compelled to incur new debts to repay existing ones, which is unsustainable.” Given how growth momentum has deteriorated in recent years, the debt-servicing ability is likely “even lower now,” according to Li.

Here’s How China Has Responded to Countries Congratulating Taiwan’s Election Winner

As global congratulations have poured in for Taiwan’s Lai Ching-te, also known as William Lai, after the Democratic Progressive Party’s presidential candidate emerged victorious in pivotal elections on Saturday, one unsurprising country is making its displeasure very clear.

Li Daokui is a Harvard-trained economist at Beijing’s Tsinghua University who served as an external adviser to the People’s Bank of China early in the last decade. In October, he delivered a lecture on his findings on the debt accumulated by China’s local authorities.

He explained that one oversight in previous estimates was a failure to dig out the basis for “capital” behind major infrastructure projects, such as a massive rail transit loop in the southwestern mega-city Chongqing. Almost two-fifths of Chongqing’s broader, near-$29 billion project came from so-called “paid-up capital.” But Li and his colleague’s analysis showed that the “paid-up capital” was effectively debt as well.

White elephants projects.🤣🤣

Most of this debt came from building infrastructure, much of which is unlikely to generate revenues sufficient to pay off the obligations. With China’s trend growth rate notably lower now than it was, it leaves a burden over the long haul. National authorities have the wherewithal to resolve the problem, but it would take a major rethink in economic policy. Without a strategic shift, it leaves China heading for Japan-style stagnation.

Fast forward to today, and something similar may be emerging with regard to China. In recent weeks, China watchers have taken notice of a previously little-publicized assessment by a former adviser to China’s central bank. Li Daokui has estimated that local Chinese authorities had by 2020 run up a much bigger tally of debt than previously realized, at some 90 trillion yuan ($12.6 trillion).

There is always a reason why CCP stock market going down so fast.🤣🤣

Japan’s descent into stagnation is an infamous economic tale known around the world. But at its start, in the early 1990s, it wasn’t abundantly clear what was happening to what was then the world’s No. 2 economy.

Much to the frustration of Japan’s Ministry of Finance, there was a coterie of keen financial analysts who warned that the country’s debt problem was a whole lot worse than advertised, and that economic growth wasn’t going to magically make it go away.

Speaking in support of Lucas’ bill, House Financial Services Committee chairman Patrick McHenry, a North Carolina Republican, said it would make China a “pariah in key organisations devoted to ensuring global economic stability”.

If the US effort succeeds, China would face exclusions similar to Russia after its invasion of Ukraine.

Sponsored by Pennsylvania Republican Dan Meuser, requires the US Treasury to push Beijing for greater transparency in its exchange rates at the IMF.

The first two bills passed the Republican-controlled House by voice vote, and Meuser’s bill passed 379-1. Now the bills must pass the full Democratic-controlled Senate before heading to President Joe Biden to be signed into law.

Wow 379-1. Thats why the two evils Xi & Putin able to unite both parties.

The US House of Representatives advanced three bipartisan finance bills concerning Taiwan and mainland China on Friday, bringing legislation meant to bolster American support for the self-ruled island closer to becoming law.
The first of the three, sponsored by California Republican Young Kim, supports including Taiwan as a member of the International Monetary Fund.

US officials have said that Washington will uphold its longstanding policy toward Taiwan no matter who takes on the top job. The Biden administration will dispatch an unofficial delegation – including former senior officials – to Taipei following the election in keeping with past practice, according to senior officials.

The delegation visit “will be a signal, a very symbolic way of supporting Taiwan,” said T.Y. Wang, a professor at Illinois State University.

"We've written a new page for Taiwan's history of democracy," Lai, long the frontrunner in the polls, told reporters after both his opponents conceded defeat.

Lai said he would maintain the status quo in relations across the Taiwan Strait, but that he was "determined to safeguard Taiwan from threats and intimidation from China".

US officials have said that Washington will uphold its longstanding policy toward Taiwan no matter who takes on the top job. The Biden administration will dispatch an unofficial delegation – including former senior officials – to Taipei following the election in keeping with past practice, according to senior officials.

The delegation visit “will be a signal, a very symbolic way of supporting Taiwan,” said T.Y. Wang, a professor at Illinois State University.

“The Taiwanese people have successfully resisted efforts from external forces to influence this election,” Lai exulted in his acceptance speech.

The result gave the ruling Democratic Progressive Party its third straight term in the presidency.

“We have shown the world how much we cherish our democracy,” Lai said. “This is our unwavering commitment.”

Taiwan voters re-elect anti-China ruling party

Voters in Taiwan defied a heavy pressure campaign from China, choosing Beijing’s least favored candidate as president Saturday in a win that will likely stoke further tensions between the island democracy and its communist neighbor.

Hadley was joined by former Deputy Secretary of State James B. Steinberg, who affirmed bipartisan support for Taiwan “based on our unofficial but warm relationship, our insistence on exclusively peaceful means to address the cross (Taiwan Strait) issues, the importance of dialogue and the avoidance of unilateral efforts to change the status quo.”

Evil alliance don't try to be funny.

Retired U.S. officials met with Taiwan’s President Tsai Ing-wen on Monday and praised the island’s democratic process that produced a new president-elect and legislature over the weekend in defiance of China’s claim of sovereignty over Taiwan and threat to annex it by military force.

“Taiwan’s democracy has set a shining example for the world, a democratic success story based on transparency, the rule of law and respect for human rights and freedoms,” former national security advisor Stephen Hadley said.

America’s commitment to Taiwan is “rock solid,” he said.

Sean King, senior vice president of Park Strategies, told Nikkei Asia that Lai's win means more of the same in terms of Taipei's relations with Beijing and Washington. China is expected to fly more military aircraft over the median line in the Taiwan Strait, attempt to poach more of Taiwan's formal diplomatic allies and punish Taiwan business interests that favor Lai, the analyst said.

Ties between Taipei and Beijing have deteriorated since China stopped talking to the Taiwanese government after Tsai took office in May 2016. Relations have further soured due to the escalating U.S.-China tech and trade war. The Tsai administration has tightened its export controls on technology and enacted an economic espionage law to prevent trade secrets from flowing into China following Washington's blacklisting of Huawei Technologies in 2019.

Vice president-elect Hsiao Bi-khim, the former de facto ambassador to Washington, has been dubbed the "best U.S. expert from Taiwan." She is also the island's first-ever vice president not born on the island.

Lai said that as leader, he has a responsibility to "maintain peace and stability in the Taiwan Strait" and that Taiwan will "continue to walk side by side with democracies from around the world" -- a key point of the DPP's campaign.

Lai also expected to push forward with DPP policies such as phasing out the use of nuclear power and forging even closer ties with the U.S.

In August last year, Zhongrong International Trust, which belongs to the "China Plant System", was shocked to report that 350 billion yuan of trust products had been suspended due to the impact of investment in real estate; A number of listed companies have successively announced that the products of Zhongrong Trust have not received the principal and investment income within the time limit, triggering market panic that China's version of the "Lehman Storm" is coming.

On the evening of November 22, 2023, Zhongzhi Group broke the silence and issued a letter of apology to investors, frankly admitting that the debt scale is huge, with a total asset account of about 200 billion yuan, but the scale of debt principal and interest is about 420 billion to 460 billion yuan, which has been seriously insolvent and there is a significant risk of continuing operations. This also means that the "Chinese planting system" is unable to repay at least 220 billion yuan.

Three days after the official explosion of the Zhongzhi Group, the Chaoyang Branch of the Beijing Municipal Public Security Bureau reported that it had recently filed a case for investigation of the suspected illegal crimes of the wealthy company owned by the "Zhongzhi Department" in accordance with the law, and took criminal coercive measures against Xie Moumou and other suspects.

This is CCP shadow bank must be very surprise.

Speaking to journalists after his victory declaration, Lai sought to reassure allies such as the U.S. that he would stick to Tsai's policies."In the past eight years President Tsai had a very steady foreign policy and national defense policy. Her way of doing things has received recognition from the international community," he said. "So according to the constitutional order of the Republic of China, I will conduct cross strait affairs according to that system, so that cross strait relations can return to a healthy and sustainable way of exchanges."

Lai is likely to continue the policies of incumbent Tsai Ing-wen and seek to maintain the status quo with China over the next four years after he takes office in May.

His victory comes after what his ruling DPP called China's most heavy handed attempt to meddle in the election through means such as a disinformation campaign and an overt military threat. Communist China has never ruled Taiwan, a democracy of 23 million people, but sees it as its territory and has not ruled out taking the island by force.

In the wake of the House passing the PROTECT bill, Kim wrote on X: “We cannot allow the Chinese Communist Party to keep Taiwan out of international organizations.”

“I’ll always be a voice for our freedom-loving partners across the globe,” she wrote.

The bills are to proceed to the US Senate and if passed there, would be sent to the president to be signed into law.

The international financial organizations listed in the bill included the G20, the Bank for International Settlements, the Financial Stability Board, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors and the International Organization of Securities Commissions.

The PROTECT Act, sponsored by US Representative Frank Lucas, is aimed at isolating the Chinese Communist Party from the international financial system by directing the US Federal Reserve, the US Secretary of the Treasury and the US Securities and Exchange Commission to exclude Chinese representatives from the proceedings of international financial groups and organizations if China were to invade Taiwan.

"The experience of Taiwan in developing a vibrant and advanced economy under democratic governance and the rule of law should inform the work of the international financial institutions, including through increased participation by Taiwan in the institutions,” it said.

The bill says that Taiwan is the 21st-largest economy in the world and the US’ 10th-largest goods trading partner, and that although it is not an IMF member, it is a member of the WTO, the Asian Development Bank and the Asia-Pacific Economic Cooperation forum.

The US House of Representatives on Friday passed the Taiwan Non-Discrimination Act of 2023 and the Pressure Regulatory Organizations To End Chinese Threats to Taiwan (PROTECT) Act, aimed at countering China’s efforts to exclude the nation from participating in international financial institutions.

The House Financial Services Committee said in a statement that the non-discrimination a, sponsored by US Representative Young Kim, would require the US to advocate for Taiwan’s membership in the IMF.

Speaking in support of Lucas’ bill, House Financial Services Committee chairman Patrick McHenry, a North Carolina Republican, said it would make China a “pariah in key organisations devoted to ensuring global economic stability”.

If the US effort succeeds, China would face exclusions similar to Russia after its invasion of Ukraine.

If a US president were to determine there was a threat from Beijing to “the security or the social or economic system of the people on Taiwan and any danger to the interests of the United States”, Lucas’s Protect Taiwan Act would make it US policy to exclude China from the Group of 20 and bodies like the Bank for International Settlements and the International Organisation of Securities Commissions.

A strong message.

Ever since Beijing began to set out ambitious timelines for the People’s Liberation Army’s modernisation, Washington has speculated that an attack on Taiwan may be imminent.

“IMF membership for Taiwan would also unlock the potential for membership in other international financial institutions, such as the World Bank and Inter-American Development Bank,” stated a congressional report from December.

Kim’s bill, the Taiwan Non-Discrimination Act of 2023, would require the US Treasury to actively support Taiwan’s admission into the IMF, employment for Taiwanese nationals at the body and Taipei’s participation in the fund’s monitoring of the self-ruled island.

What a joke u call Malaysia a democracy system under Tun M.🤣🤣

Beijing sees Taiwan as part of China, to be reunited by force if necessary. Most countries, including the US, do not recognise Taiwan as an independent state, but Washington is opposed to any attempt to take the self-governed island by force and is committed to supplying it with weapons.

Washington in recent months and years has increasingly backed Taiwan’s participation in international organisations while raising concerns about Beijing’s active role in them.

Friday’s developments came just ahead of Taiwan’s pivotal presidential election on Saturday in which the ruling Democratic Progressive Party faces a strong challenge from the more conservative and Beijing-friendly Kuomintang.
Speaking on the House floor on Wednesday, Kim urged colleagues to vote in favour of her bill to “send the Taiwanese people a strong message of solidarity and support for their democracy”.