China's economic facade. (Scan).(Brief Article)

For some time, China has claimed an annual economic growth of at least 7 percent. But real life casts doubt on these figures. Visitors see scores of rural people camped out at railroad stations or on sidewalks with nothing to do. Block after block of abandoned construction projects in cities suggest a severe lack of funds. The recent proposal that stock be sold to raise money for the Three Gorges Dam public works project points at the same problem. Almost-daily protests by workers, many violent, are also a clue that all is not well in the land of the mandarins.

Moreover, official figures don't make sense: How can energy use be falling in a booming economy? Why is unemployment rising, as government statistics show? (Imports continue to rise, however.) Chinese Premier Zhu Rongji recently told a television audience in his country that China's economy would have "collapsed" without the state stimulus spending currently taking Beijing's government debt to record levels. Given that Zhu Rongji is someone who chooses his words carefully, the term "collapse" is alarming. If the economy is burning up the track, why has state borrowing for pump priming been necessary?

The truth is, Western observers have been badly misled by Chinese statisticians. A shining exception is Professor Thomas Rawski of the University of Pittsburgh, who has made highly persuasive empirical presentations over the past year, including a recent one at the American Enterprise Institute, suggesting that China's economy may actually have been contracting rather than growing since 1998.

China's actual unemployment rate may be four times the official rate of 4.5 percent, Rawski reports. ...