WASHINGTON – The Financial Times reports that the Chinese Communist Party gave detailed directives to all Chinese media about how they will have to report economic news.
Here is the story they must tell, in the aftermath of the Shanghai stock market crash and other bad developments, regarding the overall economic slow down in China: “The focus for the month of September will be strengthening economic propaganda and…promoting the discourse on China’s bright economic future and the superiority of China’s system”.
Got that? A dramatic loss of momentum becomes “China’s bright economic future”. A mercantilist model that run its course is in fact “a superior economic system”.
Look, these efforts to manipulate the message are not shocking revelations. The Communist Party runs China and in a broad sense it “owns” the economy. There is no question that a large part of the party’s prestige and overall legitimacy rests on its reputation as competent economic steward.
Therefore, it is no surprise that, confronted with a sustained bad economic trend, the party orders all media to publish only “happy news”. The point is to preserve the party’s image. Negative news hurt politically. They tarnish the party’s prestige.
Most official data is fake
That said, all this active effort at manipulation tell us at least one thing. Most likely, the real situation in the Chinese economy, (data about growth, unemployment, and bad debt), is worse than what we think. Based on this revelation, we can count on the facts that all official statistics are routinely doctored, so that things will appear far better than they are.
Again, nothing too surprising here. With all its years of reforms and partial liberalization, China remains an autocracy. Those in power must be depicted as capable and wise. They make no mistakes. They steer the country in the right direction, and at the appropriate speed.
We bought the story
The problem is that Western policy-makers and media bought this fake story. They swallowed this propaganda as if it were legitimate news. They bought the exaggerated growth statistics.
So, what do we make of all this? Even if we discount the fluff created by the “happy news” ordered by the authorities, in the end, China is not a disaster. Far from it. We are talking about a loss of momentum, not about an economic collapse. With its immense cash reserves, China will pull through.
The glitter is gone
However, the glitter is gone. A debt-driven growth model based on ever-growing exports, and a never-ending construction boom, has run its course. Most likely for good. China still has impressive resources. It will continue to grow, probably at a respectable 4% to 5% rate.
But it will soon become clear to the entire world that China’s leaders did not invent “a superior economic system”. Far from it. And, in the long run, this fall to earth will hurt them politically. They built themselves up as invincible economic geniuses. It turns out they are not.
Yes, the party propaganda machine will do its best to force Chinese media to tell a different story. But this is a defensive battle, damage limitation.
Again, the glitter is gone.