As China's economy takes a precarious turn, the government's tactics are becoming clear: Maintain control by shrouding economic figures in darkness. Beijing recently announced that it would no longer publish youth unemployment figures, a decision that comes amid disappearing data and a bevy of questions surrounding the true state of China's economy.
Despite this, the S&P 500 and NASDAQ continue to climb. The S&P 500 is currently up more than 18% year to date, and the NASDAQ has cleared more than 43% year to date. Many other U.S. markets are on the rebound. The housing market continues to climb despite rising interest rates. The retail startup investing market continues to do well, with platforms like StartEngine having nearly $100 million invested on their platform this year alone, including over $17.5 million invested in their ongoing raise.
The Missing Unemployment Report
Earlier this month, the Chinese government's decision to cease publication of youth unemployment figures brought the issue to global headlines. July's unemployment data revealed a record 20.5% youth unemployment rate, serving as a harsh reminder of China's struggling economy post-COVID-19. The removal of this figure is perceived by experts as a move to maintain an image of stability rather than transparency.
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Data Disappearance: A Pattern, Not An Anomaly
The absence of youth unemployment figures is just the tip of the iceberg. Data ranging from exports to cement production, essential for understanding China's economic structure, have either disappeared or become unreliable. Experts believe this aligns with President Xi Jinping's strategy of prioritizing ideological purity over economic growth.
Despite China's pressing economic problems, Xi has asked citizens to prepare for a "struggle" and prioritize geopolitical concerns. This poses challenges for multinational companies like Nike Inc. and Starbucks Corp., which have invested heavily in a growing and opening Chinese market. Xi's approach is also causing unrest among foreign investors, who are now selling off Chinese stocks and bonds at an alarming rate.
Economic transparency in China has always been closely linked to its political climate. The real estate sector, which accounts for about 30% of China's gross domestic product (GDP), is among those suffering from vanishing data. Information about land sales and consumer confidence has been withheld since the end of last year, raising doubts about the official numbers. Not just real estate, even exports — constituting 18% to 24% of China's annual GDP — have begun to show discrepancies, fueling concerns over the country's overstated export numbers.
Wall Street's Chinese Conundrum
While Wall Street initially anticipated a robust economic rebound for China post-COVID, the sentiment has quickly turned into panic. Suggestions for economic relief, such as stimulus checks for households, are unlikely under Xi's regime, which deems it more critical to maintain control than to stimulate the economy.
Beijing's concealment and alteration of economic data are not without costs. As Charlene Chu, managing director and senior analyst at Autonomous Research puts it, "Withholding/recalculating data may help manage confidence issues domestically, but in our experience, it can undermine it with foreign investors."
Beijing's Gamble
By prioritizing ideological control over economic transparency, Xi's government may be looking to mitigate social instability. However, this strategy could backfire, as it not only exacerbates existing debt problems but also alienates foreign investors and corporations. Xi's government has made it abundantly clear that maintaining power is more important than economic development — a risky bet whose outcome remains to be seen.
In a world reliant on data for decision-making, the Chinese government's decision to keep its economic numbers under wraps raises both eyebrows and concerns. While the internal intricacies of China's economic landscape grow ever more difficult to decipher, one thing is clear: Transparency is not Beijing's current game. And, it appears, President Xi Jinping is entirely comfortable with that ambiguity.
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