|China thermal Power Plant,|
When the Eurozone crisis was spreading its root to more and more countries, the economic trouble did not spare BRIC countries as well, these countries are those which are considered as the future economic superpowers, and many developing as well as developed countries acknowledge the potential BRIC has to support and troubleshoot the current financial crisis.
BRIC countries are considered to be future powerhouse taking in account their current growth rate and demographics statistics. Although at present they are not any big economies except China. Still taking some responsibility, BRIC countries pledged $60 billion (US) to depth wrecked Eurozone. The amount is the part of contribution to the IMF's financial firewall to help the debt-wracked 17-nation Eurozone. Out of which India has pledged $10 billion.
With the Eurozone crisis strengthening, many economists have started doubting on the capabilities of BRIC and the current behaviour of these economies that they can be future powers. Prominent corporate executives in China as well as in the west are doubting the sputter in the Chinese economy. It is believed that local and provincial officials are faking the economic statistics to project China as the country of continuous growth.
It was only recently that India started feeling downturn in its economy and world critics of BRIC were writing in full flow. However downturn in the economy of India is more because of the domestic reasons than that of external reasons. [Read: Indian Economy Slowdown; Government Policies and Euro Crisis]
Not Just India, But Brazil is also expecting a slow growth rate this year. Brazil's finance minister has lowered the forecast for the South American country's economic growth this year, blaming the global financial crisis.
Finance Minister Guido Mantega says Brazil's gross domestic product is now expected to be 4 percent during 2012, against a previous prediction of 4.5 percent growth. However, The latest weekly Brazilian Central Bank survey of private economists is forecasting even lower growth this year, putting it at 3.1 percent.
In China there are certain evidences of slowing economy, for example record-setting stores of excess coal have been accumulated at the country's biggest storage areas. This is not because of excessive mining, but because the Chinese thermal power plants are now burning less coal to due to the decrease in the electricity demand. However, the local and provincial government officials are forcing the plant managers to avoid giving the details about the slowdown in the production of power.
There are various criteria that are considered while measuring the economy of a country. Gold and the strength of a country's currency is one criteria, the production and consumption of steel and electricity is also one important criteria. Rate of electricity production and consumption in China is very carefully followed by foreign investors and by even some Chinese officials as the gold standard for measuring what is really happening in the country's economy at the moment. Since gathering and reporting of data in China is not transparent. Electricity consumption, volume of rail cargo and the disbursement of bank loans are the things to follow in China, since their official data may be seriously manipulated.
Keith Bradsher of The New York Times writes that the executives and economists in China and the west roughly estimates that the effect of the inaccurate statistics was to falsely raise a variety of economic indicators by 1 or 2 percentage points. That may be enough to make very bad economic news look merely bad.
China has been blamed for manipulating its currency as well as economic data to keep itself on the top and attractive for foreign investors. Studies by the institutions like Goldman Sachs have suggested that Chinese statisticians level out the quarterly growth figures, under-reporting growth during boom years and overstating growth during economic downturns.
Corporate executives and economists said, even though cities and provinces are overstating economic output, corporate revenue, corporate profits and tax receipts, there is a big difference in what is being reported and what is the actual status. According to them government urges businesses to keep separate data and records to show improving business results and tax payments that is not true.
Chinese government doesn't like to see any growth rate in negative, hence they tell the power managers to report any negative changes as zero or no change, said a chief executive in the power sector as quoted by The New York Times.
The journal also got the opportunity to talk to another top corporate executive in China who had access to real electricity grid data from two provinces in east-central China which are centers of heavy industry, Shandong and Jiangsu. According to the official, electricity production in both the provinces had fallen down by more than 10 percent in May when compared to the data of May last year. He also believes that the story is same int he western China as well. However the government officials reports that the electricity production has indeed slowed down, but not to the negative levels.
Rohan Kendall, senior analyst for Asian coal at Wood Mackenzie told the New York Times that the coal which is being accumulating at Qinhuangdao port has reached 9.5 million tons this month, breaking the previous record of 9.3 million tons as coal arrives on trains faster than needed by power plants in southern China.
It is not just about the Qinhuangdao port, other three largest coal storage areas in China — in Tianjin, Caofeidian and Lianyungang — are also at record levels, an executive in China said.
While China is being manipulative, the world doesn't know where it is standing in terms of the economic disaster that is going on. If the ongoing claims against China's policy come out to be true, then the world is surely standing at the worse place than what we all think now.
However, if we do not talk about electricity production, then even other economic indicators are showing some or the other signals of a possible slowdown in the Chinese economy. Fixed-asset investment has been growing at its weakest since 2001 and the annual growth rate for industrial production has dropped below 10 percent.
The National Bureau of Statistics, the government agency in Beijing that compiles most of the country's economic statistics, denied that economic data had been overstated."This is not rooted in evidence," an agency spokeswoman said.
Stephen Green, a China economist at Standard Chartered Bank, said that the Chinese economy was still likely to recover this autumn as extra bank lending started to stimulate spending.
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