China's Economic Growth Claims Raise Data Doubts

As China returns to economic growth, the country's official report for the third quarter has drawn mixed reviews on the strength of the recovery. According to the National Bureau of Statistics (NBS), China's gross domestic product rose 4.9 percent from a year earlier in the quarterly period. The growth rate improved from the second-quarter pace of 3.2 percent and the record 6.8-percent plunge in the first quarter during the COVID-19 lockdown. In its press release, the NBS highlighted the sharp turnaround from negative growth of 1.6 percent in the first half to a positive 0.7-percent gain in the first nine months of the year. The official results were seen as signs of success for China's response to the COVID-19 crisis and its economic policies. "As most of the world still struggles with the coronavirus pandemic, China is showing once again that a fast economic rebound is possible when the virus is brought firmly under control," The New York Times said. The Wall Street Journal agreed that the third-quarter growth brought China "back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy." But the positive reports both noted that the quarterly growth rate fell short of analysts' expectations. Median forecasts of 5.2 and 5.3 percent were reported in surveys conducted by Reuters and the Journal respectively. "Slower recovery in Chinese consumption remained a drag, with retail sales contracting 7.2 percent in the first nine months of 2020 from a year ago," CNBC said. Retail sales growth showed faint signs of life with an 0.9-percent increase in the third quarter, posting the first quarterly gain so far this year. Sales in September rose 3.3 percent, topping the 0.5-percent rate in August, the NBS said. Analysts have kept an eye on retail sales as a gauge of consumption and demand, which the government sees as its main sources of growth. Dual circulation President Xi Jinping has been promoting his "dual circulation" strategy as the basis of policy for the next five years. The new economic formula designates the domestic market as the "mainstay" of the economy while assigning lesser roles to traditional sources of exports and investment. Despite the upticks in August and September, consumer spending has fared relatively poorly this year. In the first nine months, retail sales in cities dropped 7.3 percent and fell 6.7 percent in rural areas as China's 290 million migrant workers gradually returned to their jobs. Some key sectors of consumer activity have suffered significant declines. In the catering industry, for example, income has plummeted 23.9 percent, the NBS said. Meanwhile, exports have shown surprising strength, rising 9.9 percent in dollar terms after increasing 9.5 percent in August, Reuters said. The gains are all the more remarkable in light of the economic slowdown in China's global markets and the recent strengthening of the yuan. It is unclear whether the surge is sustainable, but for the time being at least, it has boosted industrial output. Industrial production climbed 6.9 percent in September, beating the Reuters median forecast of 5.8 percent. The NBS has recorded increased output for six consecutive months. The gains were "mostly due to robust exports," said Nie Wen, an economist at Hwabao Trust in Shanghai, quoted by Reuters. The combination of export strength and weakness in domestic demand may raise questions about Xi's reading of the economy and the dual circulation strategy, which predicts just the opposite trends. During the eight-day "golden week" and National Day holiday this month, tourism revenue reached 466.56 billion yuan (U.S. $70.14 billion), or only 69.9 percent of the outlays during last year's seven-day break, the Ministry of Culture and Tourism said. While the outlook for gradual recovery seems clear, the NBS figures are open to question. Some problems with the official data, like the jobs numbers, have been recognized for years. On Sunday, the NBS reported that the urban surveyed unemployment rate fell 0.2 percentage points to 5.4 percent in September from a month earlier, although the measure is widely acknowledged to understate idled workers. In 2009, the NBS introduced the survey data as an improvement over the wildly inaccurate "urban registered unemployment rate," which stayed virtually unchanged during good times and bad. Under pressure over the layoff numbers in 2016, the official Xinhua news agency argued that "no calculation can include all job losses." Despite the positive spin on the latest survey, many migrant workers and college educated young people have been left without jobs. "China's accelerated economic rebound in the third quarter has failed to significantly improve job prospects for the country's young and educated, reflecting a weak link beneath headline growth figures that have been largely engineered by state spending and industrial production," the South China Morning Post said. Jobless rate Although the monthly jobless rate for young graduates fell 2.4 percent percentage points in September from August, it was still 4 percentage points higher than a year ago, an NBS official said, without disclosing the actual figures. The NBS report counted only 179.52 million rural migrant workers in urban areas, a drop 3.84 million from a year before. The report also left unanswered questions about its accounting of fixed asset investment (FAI), said Derek Scissors, an Asia economist and resident scholar at the American Enterprise Institute in Washington. According to the agency, investment in fixed assets like buildings, highways and machinery reached 43.653 trillion yuan (U.S. $6.527 trillion) in the nine-month period, rising 0.8 percent and achieving positive growth for the first time this year. The FAI numbers are significant, in part, because of their sheer size, reflecting China's reliance on big infrastructure projects and property development to stimulate the economy. Based on the current report, China's FAI is equal to 60 percent of the country's nine-month GDP. But the NBS estimates for FAI have been the subject of a suspicious footnote on year-earlier comparisons that makes the growth claim impossible to substantiate, Scissors said. "The data of investment in fixed assets of the same period last year are revised according to the results of the fourth national economic census, the statistical law enforcement and inspection, and the regulations of statistical programs. The growth rates are calculated on a comparable basis," the footnote says. A search for the year-earlier data for the latest report turns up no investment totals, only growth rates, although past FAI volumes were published previously, Scissors said. The removal of the year-earlier data and the black-box adjustments make the NBS calculations impossible to duplicate, but the remaining available figures imply a widening gap in FAI growth claims. "The NBS wanted to report investment growth to date this year, so it did, but does not want to report 2019 investment being lower, so it didn't," said Scissors. "The magnitude of the unincorporated downward revision in 2019 FAI is 3 trillion yuan (U.S. $449 billion). This is larger than the claimed increment to total Chinese GDP in the first three quarters of this year over last. Right now, all else pales," he said. The data discrepancy may not alter the narrative of China's economic trajectory, which is expected to post stronger growth rates next year barring another COVID-19 outbreak, but it may cast doubt on the credibility of the current growth estimates. China's data transparency has also suffered from technical problems on the NBS website. Regular users of the NBS databases have been greeted with prohibitive security warnings about information theft and long delays for weeks. The unexplained outage has limited access to all NBS data other than press releases, effectively frustrating research of industrial production growth and commodities. The NBS tables have long been a subject of criticism for failing to reflect retroactive data revisions that the agency uses to calculate growth rates. Despite many promises of reform, the NBS now appears to be drawing a curtain of non-disclosure over more data than before.

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China's High-Carbon Plans Clash With Climate Pledge

China has yet to explain how it can reconcile plans for thousands of high-polluting projects with President Xi Jinping's pledge to achieve "net-zero" carbon emissions before 2060, energy and environmental experts say. So far, the government has continued to allow investment in coal-fired power plants and energy-intensive infrastructure despite Xi's recent promise that China will reach peak emissions before 2030 and become carbon neutral less than four decades from now. Xi has won international plaudits for upgrading China's climate targets in his video address to the U.N. General Assembly on Sept. 22. In 2015, China committed to reaching a peak in emissions of carbon-dioxide (CO2) "around 2030" under the Paris climate accords. Last month, Xi moved the deadline up to "before 2030" while setting a goal of eliminating net CO2 releases before 2060 for the first time. But the ambitious net-zero objective, which would require sweeping restructuring and a virtual end to coal consumption, was covered in a single sentence without elaboration or interim benchmarks to explain how it would be achieved. "The one-sentence announcement leaves plenty of space for different readings, the least ambitious being that there's still another decade of time to build more fossil fuel infrastructure and increase emissions," wrote environmental campaigner Lauri Myllyvirta on the website of the Center for Research on Energy and Clean Air. Indeed, Xi's sketchy outline of action may be designed to deliver the best of both worlds, offering hope to climate activists for long-term carbon solutions while leaving room for economic stimulus to recover from the COVID-19 crisis in the near to medium term. "This is a landmark announcement as China has set out an ultimate end-point emissions target," said Helen Clarkson, CEO of the London-based Climate Group. "Leaders from across the world will be keen to understand the details of how China will progress in achieving these actions," Clarkson said, as quoted by the official Xinhua news agency. Philip Andrews-Speed, senior principal fellow at the National University of Singapore's Energy Studies Institute, said the government's "not-so-green recovery package" and energy consumption trends appear to be incompatible with Xi's climate goals. "It is difficult to reconcile these with Xi Jinping's rhetoric," said Andrews-Speed. ‘A cunning plan’ This week, a group of leading researchers issued a roadmap of proposals, outlining how China could reach the 2060 goal. It called for tough cuts in emissions mainly after 2030 and an "enhanced mitigation scenario" before then, according to an article on the website of China Dialogue, an independent NGO dedicated to China’s environmental challenges. But the article cautioned that the plan is not yet official, adding that "this does not mean China will immediately fast-track deep decarbonization." Details of China's climate measures could be forthcoming in the government's 14th Five-Year Plan for 2021-2025, which may be outlined later this month before its expected release next March. Until then, it will be hard to evaluate the conflicting effects of Xi's targets and economic stimulus measures. "Either his speech was just point-scoring aimed at the United States, knowing that anything can happen over the next 40 years, or there is a 'cunning plan' about to be rolled out," said Andrews-Speed. "If the latter, the investment currently underway will either be unused and stranded with consequent financial loss, or the measures to pursue carbon neutrality will have to be more vigorous than would have been the case if announced early in 2020," he said. Michal Meidan, director of the China Energy Program at the Oxford Institute for Energy Studies, said that Xi's climate pledges "seem to have taken the domestic bureaucracy by surprise to a certain extent." "The various provincial and ministerial officials will now need to translate those announcements into concrete policies, and it remains to be seen whether this level of ambition will be visible in the 14th Five-Year Plan, especially as it relates to coal," Meidan said. Last week, international consulting firm Wood Mackenzie Ltd. estimated that meeting the net-zero target would cost China over U.S. $5 trillion (33.5 trillion yuan) in investment for new electrification capacity and technology for carbon capture and storage (CCS). In its annual World Energy Outlook this week, the International Energy Agency (IEA) noted that some countries have already set targets for carbon neutrality by 2050 or earlier in keeping with the IEA's "sustainable development scenario," with the goal of making net-zero emissions worldwide by 2070. Countries including Denmark, France, Germany, New Zealand, Sweden, and the United Kingdom have committed to meeting the 2050 or earlier deadlines by law. "To reach net-zero emissions, governments, energy companies, investors and citizens all need to be on board — and will all have unprecedented contributions to make," the IEA said. An aerial view of a coal storage facility in Hejin, central China's Shanxi Province, Nov. 28, 2019. Credit: Associated Press Economic recovery a priority But so far, China's priority has been economic recovery. The country has faced growing international criticism for its plans to build more coal-fired generation despite overcapacity and under-utilization of plants it has already built. Despite low electricity rates and losses, local authorities have continued to push coal power projects to spur economic growth and new jobs. In July, U.N. Secretary-General António Guterres blasted the practice during an online forum for students at Tsinghua University. "It is deeply disturbing that new coal power plants are still being planned and financed, even though renewable offer three times more jobs, and are now cheaper than coal in most countries," Guterres said. A study released in September by the U.K.-based website carbonbrief.org found that China's economic recovery plans are likely to have climate impacts that go far beyond the effects of the unneeded coal plants. The analysts found a total of 4,348 projects listed in the plans of eight leading provinces with a combined value of 19.9 trillion yuan (U.S. $2.93 trillion). Of the total, 6.2 trillion yuan (U.S. $913 billion) has been earmarked for energy and transport. Fossil fuel and railway projects each account for about one-third, or 2.1 trillion yuan (U.S. $309 billion), the analysts said. The study found that planned spending for fossil fuel-related projects was three times higher than that for low-carbon projects. The low-carbon development includes renewable energy projects like solar and wind, as well as nuclear power, electric vehicles, batteries and energy storage. But the low-carbon budgets would be dwarfed by spending for high-impact projects in sectors like oil refining, coal-to-chemical development, coal transport, coal power generation and natural gas pipelines, the study found. In all, 13 percent of planned spending could be categorized as low-carbon, while fossil fuel-related projects account for 35 percent with an additional 10 percent devoted to road building, it said. Drivers of infrastructure spending While the report cautions that provincial listings are no guarantee that the projects will proceed, Premier Li Keqiang made clear in a teleconference with Communist Party members in September that the central government will continue its policy of promoting economic growth by delegating approval authority to lower levels and cutting red tape. The policy of shifting approval power for new coal-fired plants to the provinces in 2015 has been blamed for a wave of new projects, which the central government then tried to stop. Xi's net-zero commitment seems to imply that Beijing will eventually have to revisit the issue of local authority or drastically change the incentives for local officials. But with 2060 still far in the future, it is unclear whether the 14th Five Year Plan will lay the groundwork for meaningful change. The study of provincial plans serves to highlight China's addiction to carbon-emitting projects as a source of economic growth, regardless of where the approval authority lies. Environmental advocates argue that low-carbon investments and renewable power are reliable sources of new jobs, but the provincial plans are a sign that transition is not as simple as flipping a switch. China's economy has been wedded to infrastructure-building for expansion, and an analysis last month by Moody's Investors Service sees little chance of change in the coming recovery years. "The Chinese government aims to use infrastructure investment to boost economic growth, and has announced a series of stimulus policies that will support infrastructure projects by reducing finance costs, broadening funding channels and easing fiscal constraints on regional and local governments and state-owned enterprises (SOEs)," said Ivy Poon, a Moody's vice president and senior analyst. "While innovative and green infrastructure investment is a new focus, traditional infrastructure projects, such as on major transportation and water conservancy, will continue to be a key driver of infrastructure spending," ET Net News Agency quoted Moody's as saying. Unless the 14th Five-Year Plan lays out a clear path for progress toward net-zero emissions, Xi's pledge for 2060 may prove to be little more than an attempt to extend his influence over China for decades to come.

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China Weighs Impact of Chemicals and Electric Cars

In a rare admission of China's continuing smog problems, a top environmental official has signaled that residents should be ready for a return of "heavy air pollution" in Beijing and the surrounding region this fall. The warning of rising emissions from economic development in the near term stands in sharp contrast with President Xi Jinping's pledge this week to make China "carbon neutral" four decades from now. On Tuesday, Xi surprised environmental advocates by setting new goals for China's carbon releases to reach a peak before 2030 and net-zero emissions before 2060. But present-day problems and economic pressures are likely to slow progress toward the climate targets that Xi announced in a taped address to the U.N. General Assembly's annual meeting. "China would need to reverse recent emissions trends," The New York Times said in a commentary. Li Shuo, a Greepeace China policy adviser, said the lack of details "was probably intended to leave the Communist Party leadership flexibility in the short term to pursue an economic rebound following the pandemic," The Times reported. The recent smog warning suggests it could be years before China resolves the conflict between economic and environmental objectives. China's smog and climate problems have been running on separate tracks, but both are affected by economic development. On Sept. 11, Zhao Yingmin, vice-minister for ecology and environment, offered a frank assessment of the causes for poor air quality in the region that includes China's capital, the port city of Tianjin and adjacent Hebei province. "The quantity of most pollutants detected in the region exceeds the environment's capacity by more than half, which is the root cause for heavy air pollution," said Zhao, the official English-language China Daily reported. "Air pollutants per unit of land in the region are two to five times the national average," Zhao said. In response to a reporter's question at a policy briefing, Zhao pointed to "clusters of heavy chemical plants, heavy reliance on coal burning for energy and on road vehicles for freight transport" in the Beijing-Tianjin-Hebei region. The findings were the result of a three-year investigation into the causes of smog problems and their solutions, particularly in the fall and winter heating seasons, Zhao said. The briefing followed a Sept. 2 decision by the cabinet- level State Council at an executive meeting chaired by Premier Li Keqiang to improve air quality efforts on the basis of the investigation. Li said that "controlling air pollution and improving air quality is a matter of concern to the public, and the government must step up science-based treatment measures and promote green development." The government plans "targeted" measures to deal with industrial pollution, small coal furnaces and diesel vehicles in urban areas, state media said. The council called for changes in energy use for industries including steel, petrochemicals and construction materials as well as increased shipment of commodities by rail and the use of new energy vehicles for urban deliveries. Sluggish improvement China has gradually improved air quality in recent years, but the pace of progress has been mixed. The government cited Ministry of Ecology and Environment data showing a 10-percent drop in concentrations of fine airborne particles known as PM2.5 in 337 surveyed cities in the first half of the year and a 16.7-percent cut in the Beijing-Tianjin-Hebei region. The reports were unclear whether the comparisons were to the comparable year-earlier period or for readings over six months. Another report based on ministry data said the region's average density of PM2.5 particles fell from 89.5 micrograms per cubic meter in 2013 to 42 micrograms per cubic meter last year, still 68 percent higher than levels considered safe by the World Health Organization. In August, Beijing municipal authorities reported that PM2.5 concentrations in January through July were down 6.7 percent year-on-year to 42 micrograms per cubic meter. But beyond the data and policy decisions, there appeared to be an acknowledgment that previous clean air initiatives had fallen short of their goals. The government made a major push to improve Beijing's air quality by banning coal for heating in surrounding cities before the winter of 2017-2018, but the abrupt order backfired when many natural gas connections could not be completed in time and prices for gas soared. The National Development and Reform Commission (NDRC), China's top planning agency, quickly moderated the fuel switching policy midway through the heating season and reduced pressure for conversions in the following year as the economy slowed. Efforts to shore up economic growth became a higher priority in 2019 as the government eased seasonal production restrictions on steel, a major contributor to coal burning and carbon emissions in the industrial northeast. This year, steel production has set monthly records, even as China struggled to recover from the economy's 6.8-percent contraction in the first quarter. Approval of new coal-fired power projects at the provincial level has also continued to spur the economy, raising further doubts about the central government's priority for air quality and climate change goals. The State Council's latest decision and Zhao's statement on the causes of pollution, particularly in fall and winter, leave it unclear whether any tougher steps will be taken in time for this year's heating season, as in 2017. Economic priority The government may only be marking the conclusion of the environment ministry's three-year investigation, postponing major measures until economic recovery becomes clear. Earlier this month, an analysis by the Oxford Institute for Energy Studies (OIES) concluded that the rapid growth of China's oil demand over the past two decades is set to slow down due to the effects of government policies in support of electric cars and other new energy vehicles (NEVs). Although strong increases in crude buying and refining in the second quarter suggest "an accelerated growth trajectory going forward, the government's recovery package and its focus on electrification will in fact weigh on oil demand in the medium term," wrote Michal Meidan, director of the OIES China Energy Program. This month, the Beijing Municipal Ecology and Environment Bureau reported that more 350,000 all-electric vehicles were operating in the city out of a total of 6.53 million motor vehicles, according to the official Xinhua news agency. Mobile sources of air pollution account for 45 percent of PM2.5 density, a bureau official said. Beijing is planning to ban high-emission vehicles from major roads, Xinhua reported. Despite the slowdown in oil demand growth, China's refiners are still planning to add capacity, but not for production of fuels. Instead, they are seeking to shift their focus to production of petrochemicals, Meidan said. The plans for upgrading production to petrochemicals could come into conflict with the government's environmental goals following the ministry's pollution investigation, which specifically cited the existing concentrations of chemical plants. In an email message, Meidan suggested that the government is trying to find a way to advance both the economy and environmental controls. "The goal I think remains to move toward more efficient processes both for coal-fired power plants and in chemicals," Meidan said. "Part of the problem remains small chemical plants or dispersed coal, but the plan going forward remains to consolidate into bigger and more efficient plants which emit less," she said. "On balance, the government is likely to prioritize pollution control this winter but likely leaving many of the concrete measures up to provinces," said Meidan. On Sept. 11, Li made clear in a teleconference with Communist Party members that the government is sticking with its policy of promoting economic growth by cutting red tape and delegating power to lower levels. Environmental groups have criticized the policy of delegating authority to the provinces for approving coal- fired power projects since 2015, citing a wave of underutilized and polluting new plants. Philip Andrews-Speed, principal fellow at the National University of Singapore's Energy Studies Institute, said that economic recovery is clearly the Chinese government's overriding concern. "There is no evidence that the environment is high on the agenda in the short-term, nor that China is taking advantage of the crisis to accelerate the low-carbon energy transition," said Andrews-Speed. "Rather, the economy, employment and, more recently, self- sufficiency are the top priorities," he said. On Tuesday, China's top climate change adviser held out hope that the government would announce detailed targets for carbon emissions by the end of the year. "China is definitely going to launch a very powerful low- carbon development target," said Xie Zhenhua, as quoted by Reuters. But China may have inadvertently telegraphed its policy priorities in a Sept. 19 Xinhua report on electricity use in August, which rose 7.7 percent from a year earlier, 5.4 percentage points higher than the increase in July, according to the NDRC. "China's electricity consumption, a key barometer of economic activity, further improved last month thanks to the country's efforts in boosting growth amid the COVID-19 slowdown," the Xinhua report said. From an environmental standpoint, a big increase in power use could hardly be called an improvement, since about two- thirds of China's electricity is generated from coal.

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China's Economy Sends Mixed Signals on Recovery and Demand

China's economy has sent mixed signals on its recovery in a little over a week as retail sales rose slightly after earlier signs of sluggish demand. On Tuesday, the National Bureau of Statistics (NBS) reported positive results for retail sales in August with an 0.5-percent gain from a year before, marking the first monthly increase of 2020. Industrial production in August also improved, climbing 5.6 percent year-on year after 4.8-percent growth in the previous two months. But fixed-asset investment (FAI) in long-lasting items like buildings and machinery continued to lag, declining 0.3 percent in the eight-month period, strengthening only marginally from a 1.6-percent loss through July, On the surface, China's recovery is picking up speed, forcing analysts to revise their readings on the rebound from the COVID-19 crisis after discouraging trade data only nine days before. On Sept. 6, the General Administration of Customs (GAC) also reported mixed results for trade in August as exports topped forecasts with a 9.5-percent dollar-denominated increase. But import weakness also exceeded expectations on the downside, falling 2.1 percent in dollar terms, dropping from a 1.4-percent decline in July. Demand down The poor import performance was seen as a sign of softness in consumer demand, a problem that has shadowed China's recovery claims for industrial output and gross domestic product growth. Retail sales growth in July seemed to stall with a month- on-month rise of 0.85 percent following an 0.83-percent increase in June, according to NBS figures. Even that small improvement may have relied on the extra day in the month of July. "China's recovery is still ongoing, but not so strong anymore," said Xu Hongcai, deputy director of the Economic Policy Commission at the China Association of Policy Science, as quoted by the South China Morning Post. "Everyone is worried about employment, and income is declining, so everyone dares not to spend much money," Xu said. The weakness in imports and sales came despite record inflows of foreign oil in June and July, as well as a push to meet terms of China's Phase 1 trade deal with the United States before the end of the year. China has also been adding to its stockpiles of other commodities like food and mining materials that may become subject to price spikes due to shortages abroad or U.S. sanctions, the Nikkei Asian Review reported. "Beijing is keen to keep its reserves high to avoid shortages that could spark domestic discontent," Nikkei said. Without those front-loaded increases, China's import decline would have looked even worse. The same could be said of the government's multi-faceted attempts to stimulate domestic demand with eased lending policies, tax breaks, subsidies and local discount coupons. The signs of weak consumer demand stood in contrast to relentless state media reports on the public's return to schools, factories and movie theaters as COVID-19 restrictions are eased. But official economic reports have yet to reflect the impact of two months of the most severe flooding in years in the vast stretches of the Yangtze River basin, with typhoons lashing coastal areas as far as the industrial northeast. False optimism Some analysts argued that the reports of China's economic recovery have gotten too far ahead of themselves. "We believe markets are somewhat too optimistic on China's growth in the second half of the year," Lu Ting, chief China economist at Nomura, told the Morning Post on Aug. 14. Last month, Bloomberg opinion columnist Anjani Trivedi wrote that "it's getting harder to say what the true state of China's economy is. The numbers are all over the place." But this week's NBS sales numbers gave rise to more positive readings, although they fell something short of a clear turnaround. "The stronger-than-expected activity data in August support our recent decision to raise our Q3 and Q4 (third and fourth quarter) to 5.2 percent (year-on-year) and 5.7 percent, respectively," said Nomura's Lu in a research note quoted by CNBC on Sept. 14. But Lu continued to voice caution over uncertainties including the strength of pent-up demand and "rising U.S.- China tensions (that) could dent China's exports and manufacturing investment." In a series of mixed signals, President Xi Jinping has chosen a curious time to unveil two new initiatives that conveyed an expectation of more economic troubles ahead. Xi's latest slogan for economic strategy, called "dual circulation," only received widespread media coverage in late July, although official chroniclers claim it was first concocted in May. The complicated concept downgrades the importance of exports to China's economic growth, elevating domestic consumption to the status of prime mover. The two segments would allow "domestic and foreign markets (to) boost each other," essentially taking whatever benefits from trade that China can get. COVID-19 impact Last year, consumer spending accounted for 57.8 percent of GDP growth, according to the NBS, but that was before COVID- 19 brought the economy to a halt. On Sept. 7, the government issued a belated warning about the weakness of consumption and its effect on the economy. "COVID-19 has made a big impact on consumption," said Premier Li Keqiang in a statement issued after an executive meeting of China's cabinet-level State Council. "Consumption ... has been significantly affected by COVID- 19 this year and become a drag on economic recovery," the official Xinhua news agency said. "For China to achieve positive growth this year, boosting consumption is vitally important," Li was quoted as saying. So far, the numbers for retail sales and trade suggest that just the opposite of the dual circulation forecast has been taking place as exports outshine expectations and domestic demand has fallen short. The mishmash raises the question of whether the government has gotten its policy wrong or whether it is forecasting more weakness to come. In either case, dual circulation is hardly a catchy slogan or an economic confidence builder. Similarly, Xi's campaign on food security, also heavily promoted in late July, seems to reflect the government's misgivings over recovery threats. "In the first half of the year, China's spring plowing and agricultural production encountered setbacks due to difficulties in transportation, circulation and grain processing," a Xinhua commentary said. "Restrictions on food exports and panic hoarding in some countries and regions, and rampant desert locust(s), have adversely affected food production," Xinhua said. The warning quickly turned into a "clean plate" campaign aimed at reducing food waste throughout China from agricultural producers to restaurants and schools. But the sudden escalation of the initiative smacked of an emergency response and austerity measures of the past, contradicting the government's claims of a speedy economic recovery in the second half. Opposite conclusions Last month, the official English-language China Daily cited a glowing report by Ni Yuefeng, minister of the GAC, calling China "the world's first major economy to witness (a) large recovery of production from coronavirus shock." "The ability to survive major shocks and the competitiveness of China's trade sector keeps rising," said Ni. "China's market share could rise further as the resumption of (global) business continues. It's remarkable," Ni said in remarks carried by the Morning Post and Xinhua. But Derek Scissors, an Asia economist and resident scholar at the American Enterprise Institute, drew opposite conclusions about the divergent trade data and whether China is leading the world in economic recovery. "August trade data says the global demand recovery is outpacing China's," said Scissors. "China's economy relies on subsidizing firms at the expense of households. China's stimulus supports production rather than consumption. The excess supply then gets dumped on the rest of the world," he said.

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