Not many days ago, renowned economist, March Faber and market analyst, Andy Xie had suggested that China's GDP growth rates may not be what they seem to be. According to them, the dragon nation is pumping in excess liquidity into 'unproductive' areas of the economy rather than diverting them to producing goods and services. In fact, Marc Faber also made a statement that the Chinese economy is growing at 2% and not at 7.8% as what its government claims.
What gives their connotations more strength is a shocking statement made by a Chinese Communist Party official recently. "Some of our GDP data sure looks rosy. But they do not amount to growth of social wealth; in fact, social resources are being wasted to show GDP growth." were some of his words. Giving an example of what the Chinese government does, he suggested that provincial party officials build a bridge, then dismantle it and then rebuild it, each time contributing to GDP. What makes his claims more believable is the fact that he is one of the few provincial party leaders who is also a member of the decision-making central Politburo. If the overstatement of economic numbers does turn out to be true, it will have huge implications! Imagine what will happen to the stock market rally that has been built around it!
An interesting fallout of all this could be that India may start looking even more attractive as a long-term investment destination!
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