China Appears to Be Covering Up Bad Economic News

March 4th, 2016

If an economy has problems, and yet nobody knows about them, do they really count?

According to a recent article in The New York Times, China’s government is seeking to eliminate bad news about its current economic problems.

Chinese banking officials normally include information about what the central bank and the commercial banks are doing to support the yuan in the monthly economic reports they issue. Economists, traders, foreign bankers and businesses pay close attention to this information. The figures were included in every report in 2015. But February’s report did not contain that information. And the central bank, the People’s Bank of China, did not respond to requests for clarification.

That’s just one example of how the Chinese government appears to be clamping down on the flow of information regarding the state of the country’s financial markets and businesses. It’s more difficult now to learn negative news about whaat is happening inside China. After all, people don’t know what they can’t read about. And what they don’t know can’t hurt them, can it? Or, at least, they can’t worry about it.

China’s government is caught in the middle of a lot of competing pressures, as a recent article in The Economist explains. It has come a long way toward going down the capitalist road since Chairman Mao died in 1977 and the Gang of Four were shortly after thrown into jail. However, it retains its nondemocratic structure. The Chinese people seem willing to accept a dictatorship as long as the government produces wealth creation. And China has grown tremendously in just a few decades. It is now the second-largest economy in the world. But it still has over a billion mouthes to feed. And it has a growing middle class who see the potential to get wealthy in the stock market. If the government cannot deliver on its implicit promise to produce affluence, its people may get discouraged.

That’s especially true if they realize the entire country is suffering, and not just their local factory or city. If the people think the problems are so widespread the entire system is in danger, they may lose patience with the government. The current problems are causing people to question President Xi Jinping’s ability to manage the economy. And even the current generation of Communistic Party officials born after the revolution must know what happens to governments when the people lose patience.

Madison Street Capital is a Chicago-based firm offering boutique investment banking advice. It helps businesses raise money to expand their businesses, including through private placement offerings. It also helps businesses who wish to acquire or merge with another company, and advises them on declaring bankruptcy. Recently Madison Street Capital came out with a report on the increase in Merger and Acquisition activity in the alternative asset hedge fund industry.

You can like them on Facebook.

Leave a Reply

You must be logged in to post a comment.