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Beijing's Reality Denial

Walter Russell Mead

China is throwing out the bathroom scale to scotch rumors it is gaining weight. The NYT:

In January data released last week, the Chinese central bank omitted or hid one key number and altered the parameters of another that gave insight into what the central and commercial banks were doing to prop up the country’s currency.

Both sets of numbers, which show commercial banks’ foreign exchange purchase positions, appeared last year in the central bank’s monthly announcements. The central bank, the People’s Bank of China, did not answer a request for comment.

The panicky Chinese attempt to cover up bad news by suppressing the release of normal economic statistics is the worst possible sign for the future of the economy. It tells us that things are so bad that the authorities (who have all that inside information that they don’t want to share with other people) think that they lose less by hiding bad news than by revealing it.

If we put that piece of information alongside the trend of rich people in China moving their money offshore by any means possible, an alarming conclusion is hard to resist: The people who know China best are the most bearish about where things are heading.

And when you in turn add that to the growing evidence that Xi Jinping is cementing his personal authority and promoting a cult of personality, as well as to the news that China continues to put pressure on media and journalism, what you get is a strong sense that the authorities in Beijing are terrified by their country’s future prospects.

China is bearish on China: That may be the most important political and economic fact in the world today. Every investor, diplomat, CEO and strategist needs to think carefully about what this means.

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