In America, no news is good news. In China, all news has to be good news. 

Never mind that Jack Ma is nowhere to be found. Never mind that small and medium businesses have yet to see a glimmer of light at the end of the tunnel when mass consumption remains weak. All day long, we hear drum rolls preparing us for a good GDP number coming from Beijing. A good GDP number concluding the year of 2020 is supposed to “prove” that China is having "a world-leading recovery" from the pandemic.

Bless you if you are statistically trained and you are NOT working for Beijing. If you were working for Beijing, you have to deflate the 2019 numbers stealthily so as to inflate the 2020 numbers stealthily. One glaring example of statistical manipulation lies in Fixed Asset Investment (FAI). By hook or by crook, Beijing will see to it that its GDP numbers totally agree with its upbeat political narratives. 

Still, Beijing cannot make its rapidly-rising debt go away. Debt is Beijing’s Achilles heel. As pointed out by independent China watcher Michael Pettis, Beijing has to take “at least 4 nominal units of additional debt to generate each nominal unit of additional GDP growth.” Translated into plain English, Beijing’s good GDP numbers are hiding its bad debt numbers. 

Total social financing is the official measure of debt in China. It was 254% of China’s GDP at the end of 2019. It was expected to finish the year of 2020 at RMB 284.8 trillion, or 280% of China’s GDP. 

By contrast, the U.S. federal debt held by the public would just reach 98.2% of GDP, or USD $20.3 trillion, by the end of 2020, according to the Congressional Budget Office estimates.

As for Beijing, politically it loves a good GDP number, but economically it hates a bad debt number. However, the unsavory truth is that Beijing has to pile up debt in order to push up the GDP. This can't go on forever. At some point, a painful decision has to be made.

Right now, Mr. Xi is stuck in a quandary.

--- Lingyang Jiang