THE SCAM OF CHINA

The headline on Bloomberg today (10/22) is dramatic:  China’s Economy Grows 8.9%.

So the Scam of China continues, one the greatest feats of cook-the-books fraudulent accounting in history, but at least it’s a teachable moment in Chinese – and Communist –  metaphysics.

First, the scam.  How is it possible for China’s explosive economic growth to be based on gargantuan exports of manufactured goods, for the sale of those exports to fall off a cliff (down over 20% this year), then continue to grow just as explosively without massive exports?

The answer is a) you can believe it because you are Alice in Wonderland’s Red Queen who could believe "as many as six impossible things before breakfast," or b) the Chicoms are lying.  Which do you choose?

All economic data coming out of China, including its aggregation into a number for total GDP growth, is provided by Chicom bureaucrats, who brazenly fudge and lie – as revealed by the journal Foreign Policy last month in How China Cooks Its Books.

A few examples:

• The majority of businesses in China are state-owned, which "buy" their products from each other in a shell game of phony sales that are recorded as real sales.
• Sales are recorded when a manufacturer ships to a retailer, not when a product is bought by a consumer.  Chinese warehouses are overloaded with unsold goods.
• While the economy is supposedly growing, gasoline usage is down 8% and electricity usage shrank 2.2%.  How can an economy grow with less gas and electricity?  (It can’t.)
• The Chicoms have copied the US and printed up over $1 trillion and lent it out to anyone politically connected, creating massive bubbles in their stock, real estate, and commodity markets.

Shanghai-based M.I.T-educated economist Andy Xie calls all of this panda-nomics.  Xie’s panda is not like the real ones in the bamboo forests of Sichuan Province but the cartoon one of Kung Fu Panda.  It’s all make-believe.

Which brings us to the nub.  For Chinese, and for Marxist Communists, there is no difference between make-believe and reality.  There is no such thing as reality.  There is only what people believe.  If people believe something is true, it is.  If they don’t, it isn’t, it doesn’t exist.

This is best exemplified by the Chinese concept of "face" or lien.

The concept of face – as in "losing face" or "saving face" – plays a critical role in Chinese culture and the way most Chinese deal with reality – a way that is fundamentally opposed to that of Americans.

If your "face" is the primary concern of your life, controlling your conduct and morality, then you believe that reality is what other people say it is, not what it is in fact.

Telling a lie, for example, is not morally wrong, no matter what the lie.  It is only wrong if people find out you have lied, for their finding out causes you to lose face.

Telling the truth, in contrast, is morally wrong if it is a truth others do not like.  Such truth-telling causing others’ displeasure results in your loss of face.

The morality of face is the morality of pretend.  As one observer of Chinese culture explains:  "If you are speaking with someone and do not understand something he says, asking him to repeat will cause you to lose face. Pretending to understand and never asking what was said, even if so doing leads to disastrous consequences, saves your face."

Another major face no-no is exposing a contradiction between what someone is saying now and what he said earlier.  That person will never forgive you for making him lose face.  Better to pretend there’s no contradiction at all.

Such of concept of reality is alien to normal Americans.  We don’t much care about face, and thus don’t agonize, for example, about "what the world thinks of us."  Only liberals care.  For normal regular Americans, if the British or French or Moslems hate us, that’s their problem, not ours.  Why should we care what they think?

Liberals care, and that’s why they’re not normal regular Americans.  For liberals, reality is people.  For us, reality is facts.

You can see, though, how much easy it is for a government to control people who believe the former rather than the latter.  People who believe in group-think rather than in their own mind’s capacity to think.  Thus the Chicoms can slaughter demonstrators in Tienanmen Square on live world-wide television, as happened in June 1989, wash the blood off the cobblestones, announce to the world the slaughter never occurred – and indignantly demand the world nod its head in agreement.

For, from the perspective of Chinese face, if people say it didn’t happen, it actually didn’t happen even though it actually did.

There is only one way to deal with this – and it is, of course, the exact opposite of what State Department squishes advocate.

Here’s an excerpt from a State Dept. Advisory on "Chinese Negotiating": 

Foreigners when negotiating with the Chinese need to be aware of the fundamentals of face dynamics, a highly delicate process by which social interaction in China is regulated. To the Chinese, "face" is their most precious possession, and care must be taken by foreigners when negotiating not to cause them to lose face; and foreigners should endeavor to give face when appropriate.

There is no mention whatever of how "American negotiating" should be explained to the Chinese – why Chinese should be aware of the fundamentals of reality dynamics, and should be sympathetic to the American concepts of not-caring-about-face, and caring-about facts-and-reality-instead-of-childish-embarrassment.

The problem, of course, is that State Department squishiness – apologetic, guilt-ridden, excuse-me-for-being-a-part-of-Western-Civilization kowtowing to our enemies, be they Chicoms, thugs in the Kremlin, or thugs in mosques – is the default position of the entire American and European elite.

Virtually all American and European business and political leaders are complicit in the Scam of China.  They refuse to call the Chicom claim of 8.9% GDP growth a lie.  They refuse to laugh in the Chicoms’ lying faces, so terrified and intimidated are they of causing Chicom loss of face.

This does nothing but strengthen the Chinese conviction that illusion is reality if everyone pretends.  Thus the Chinese version of "The Emperor’s New Clothes" would be the opposite of Han Christian Andersen’s fairy tale.  If a Chinese boy pointed out that some Chicom Mandarin was naked, the crowd wouldn’t suddenly see the truth. 

Everyone including the little boy’s parents would instantly shame him into shutting up, angrily denounce him for causing them all the embarrassment of losing face – and his parents, suffering the greatest loss of face, would the angriest of all.

The longer the charade of the Scam of China is allowed to perpetuate, the bigger the debacle at the end.  When the Chinese bubble economy pops and everyone starts saying they knew it was fake all along, real bad things may happen – as in real bad.

Most likely is that the Chicoms will seek a foreign devil to blame.  They could just lash out economically, tanking US Treasuries and the dollar, which has an upside if it caused the US government to default, thus disenabling it from future borrowing, printing money out of air, and deficit spending.

But if they lashed out militarily, it could get ugly – nuclear ugly – fast.  The consequences of reality-denial are serious.  Few are more serious today than continuing to believe in the Scam of China.