Goldman Sachs Says China is Cooking the Books (And they should know)

China, as we’ve written many times before is the ultimate crony capitalist state. We’ve also said many times that one should be very weary of any official information coming out of China. The country has been slowing for 7 quarters. That we know. But it could be a bigger slowdown than many think.

The country is polluted to the point that in many industrial areas people can’t even go outside. There has been a black cloud of particulate matter hovering over Beijing for a week. The only reason we know about it is because it can’t be hidden. There is so much filth in the air even the Communist Party of China can not dispense with it.

Beijing pollution

The Party can however fudge economic numbers for a very long time, and they have been doing it for a very long time. The question is at what point will the accounting pollution become visible? The economy seems already to be choking.


Finally, that China is openly making up numbers is no surprise: it will continue doing that until, like everywhere else, the discrepancy between perception and reality (usually manifested in the case of China by a lot of angry people breaking something or simply rioting) becomes too glaring for even the most optimistically inclined to ignore.

What is a surprise is that it is none other than the banks – the primary carriers of the status quo gene – who are implicitly pulling the rug out from beneath the economy that is supposed to once again, as in 2008 and 2009, provide the bridge from a contracting “here” to a growing “there.”

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