Never trust the economics from SOAS, just never

George Magnus is a research associate at Oxford University’s China Centre and at Soas. He is the author of Red Flags: Why Xi’s China is in Jeopardy.

Who then says:

Historically, China’s growth miracle has been remarkable. In the 30 years to 1990. The money GDP (the market value of goods and services produced in an economy) for China and the US in American dollar terms grew more or less in tandem at just over 6% and 8% per annum, respectively. . But in the next three decades, China’s GDP growth doubled to over 13%, while America’s halved to 4.5%. That pushed China’s GDP up from 5% of American GDP to 66%.

He’s using money GDP. That means he’s not adjusting for inflation, which differs in the two places. Also, differs over time, making the rate comparison pretty dodgy. But also he’s measuring in $. But the Chinese currency was a fixed – and entirely fanciful – rate for most of that time. Making straight yuan to $ comparisons absolute nonsense.

Just nonsense numbers to be using.

7 thoughts on “Never trust the economics from SOAS, just never”

  1. While no doubt the Chinese will use their additional wealth to try and push us around, I do have to approve of their policy of making themselves richer.

    There’s no reason at all – and yes I do mean climate change – for them to live in poverty when they can burn plenty of coal and oil to increase their wealth.

  2. If a car is at point X at midday, and 100 miles further away at 1pm, then you can safely say that the average speed was 100mph, regardless of the precise speed in between.

    China didn’t start fixing the currency until 1994, and it maintains only a loose peg today; so the fixes in between don’t matter. The author can safely assert average GDP growth between 1990 and 2020.

  3. A simple way to work out if an exchange rate is being rigged by government is to ask if there is a black market in the currency.
    For Yuan to GBP there is.

  4. The 1960-1990 average can’t be asserted, as you say. The 1990-2020 average can. Only the latter matters in support of his claim of a “growth miracle”.

    His blanket characterisation of 1960-1990 is a curious choice. Giving him the benefit of the doubt, perhaps he had a limited word-count; or perhaps he doesn’t want to offend Guardian-readers’ sensibilities by drawing attention to the failures of communism.

  5. To be fair Magnus knows his onions and is one of the more prominent people pointing out the unreliability of Chinese statistics and called out the nonsense of the BRICS from the beginning.

    15 years as Chief economist of Warburg/UBS gave him some idea of the workings of the market.

  6. 1960s China was such a thriving and vibrant place that my ex-wife’s family hand-rowed a dingy 70 miles across the South China Sea to get to Hong Kong.

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