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Economist Brad Setser Soule concerns concerning silent change in the way China brings in its commercial surpluses, a change which, according to him, masks billions of dollars in unusual income and capital outings.
What happened: On Keep things simple On Tuesday of the series of webinaries, Setser, former economist of staff of the US Treasury Department, said that changes in China in the way it followed and reports that commercial data “reduced its current account surplus by about half compared to what I think is”.
According to Setser, the surplus manufacturing of China has increased by around 1% of world GDP, or 1 billion of dollars, so with this half, half of it suggests a difference of $ 500 billion in hidden trade.
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For years, analysts could closely estimate the current account of China using its excess goods and services to exchange services and services. But during the pandemic, this correlation “disappeared”, says Setser, adding that this difference stems from a change in its relationship methodology.
Instead of using transparent customs data, China now calculates its current account using a set of internal payment data which, according to Setser, “is internal, it is not transparent and which is not disclosed”.
Setser believes that motivation behind this change may have been to avoid an examination abroad of growing commercial surpluses from China. On the other hand, this “fudge factor”, as it refers to it, may have been a way to hide the country's capital flight.
“An effect of reducing the current account surplus is that you reduce the estimates of the financial flow and, therefore, the hot money which could say that some people could say in an embarrassing manner to leave China in Xi,” he said.
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Why is it important: The economic model of China was criticized, especially recently, with the American secretary to the Treasury Scott bets Accusing the country of creating persistent commercial imbalances, which “contribute to global dependence on American demand to stimulate growth”.
Other eminent macro-experts and economists have also urged the Chinese government to reform its economic model, especially Nouriel RoubiniWho said last month that it was not only the United States that demanded change, but “the rest of the world is also expected.”
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