China’s propensity for obscuring reality should be a global cause for concern
Dissidents such as Guo Wengui AKA Miles Kwok, believe that increasing CCP censorship makes it difficult to know what’s happening in the country
The ruling Chinese Communist Party, the CCP, has historically maintained a vice-like grip on information coming out of the country, and under the leadership of President Xi Jinping, this has only further intensified, to the point where Beijing drip feeds the information it wants to share with the world, while hiding away and dismissing anything that would give the impression things are less than perfect. At a time when the country’s presence on the world stage continues to grow, Beijing continues to pick and choose what information it shares. As a result, the ins and outs of what’s really happening with its economy are becoming increasingly opaque.
In recent months, we’ve seen new laws imposing ever more intrusive surveillance and tighter crackdowns on dissidents as the long arm of the state continues its encroachment collecting private data from businesses and individuals alike. Under President Xi, the CCP is sending the clear message that authoritarianism is not going away any time soon.
Since joining the Word Trade Organisation in 2001, the country has experienced exponential growth, and has become a considerable player on the world stage; politically, militarily, and most significantly, economically. Recent estimates suggest the country is owed $385 billion by other countries, much of which is ‘hidden debt’ to poorer developing nations, while research from the IMF indicates that much of the world’s economic growth over the next two years will be driven by China.
However, despite its economic might, Beijing’s own economic practices aren’t particularly sustainable, with unreliable statistics, non-performing loans and gross overestimations of GDP, which have all been kept hidden from the rest of the world. Last week’s news of China Evergrande, one of the country’s largest property developers missing its latest loan repayment, which had already been pushed back a month, sent shockwaves around the world as the true scale of the company’s misfortunes come to light. The company is on the verge of a what could potentially be one of the largest defaults in the country’s history, with more than $300 billion in liabilities. While international markets could see the decline of Evergrande’s share price, the extent to which things have deteriorated, have sent shockwaves across global creditors who are bracing themselves for what would be the largest default since the Lehman Brothers collapse that sparked the global recession in 2008.
A statement issued by the company last weekend, ahead of the missed payment, said there was “no guarantee that the group will have sufficient funds to continue to perform its financial obligations…” in the days following, the company’s billionaire founder, Xu Jiayin was reportedly summoned by CCP officials to explain the statement, which would have been seen as a sign of weakness and failure by Beijing.
Evergrande is not the only developer in crisis, with estimates suggesting that almost a third of the businesses in the industry are facing a similar fate, in part due to borrowing restrictions imposed by Beijing. Rather than implementing effective regulatory changes to effect reform, the CCP has chosen to go down the path of tighter controls and restrictions, many of which aren’t relayed to the outside world, to keep some of its largest industries and businesses afloat. This was certainly the case with Evergrande as it was reported that the provincial government in Guangdong has dispatched a team to “supervise” Evergrande’s leadership team.
Earlier this year, The Heritage Foundation published its inaugural China Transparency Report which analyses the country’s transparency across eight different policy areas, including human rights, the military, politics and law and the economy. On the economic front, the country has a poor rating of 4 out of 10, while its overall 5 out of 10 rating doesn’t fare much better.
Dissidents of the CCP, like exiled Guo Wengui, also known as Miles Kwok, argue that censorship, restrictive clampdowns and data security laws in the country, enforced as a means for Beijing to exert control over private enterprise, are deterring foreign companies from investing into, or trading with, Chinese businesses because they are finding it increasingly difficult to get hold of accurate stakeholder information and financial reports.
Speaking to the Wall Street Journal, Stephen Nagy, professor of politics and international studies at the International Christian University in Tokyo said: “China has always been a big black box… and that black box becomes even blacker,” as access to information by outside investors continues to become harder, making it that much more difficult for firms and investors to understand where things really stand in the country.
The continued censorship of information, with laws preventing firms from sharing financial information with foreign partners, are stifling foreign direct investment, and have ensured that business can only operate, and thrive, if it is in the interest, and for the benefit of the CCP. Despite the façade of healthy economic growth and influence, China is still, and will continue to become an increasingly unfree and closed economy, and Beijing’s opacity is likely to make its relations with its economic partners even more strained.
One need only look back at the origins of the Covid-19 pandemic, and the fallout between the WHO, the international community and China to see that Beijing is notable for withholding information and falsifying and manipulating records to suit its narratives. Burying their head in the sand to ignore issues and pretend they aren’t there may work in the short-term to appease the leadership, but it certainly doesn’t make the problems go away and ultimately means things will only get worse before they get better, and that should be a cause for concern among those eager to rein-in the country’s influence on their own economies.