Gordon G. Chang: China's Car Sales Are a Fraud

Bertel Schmitt
by Bertel Schmitt

If right-wingnut Glenn Beck needs a China hater on the tube, he usually calls Gordon G. Chang. Chang is always good for talking bad about China. In 2001, Gordon Chang published a book titled. “The Coming Collapse of China.” In it, he predicted that China would implode by 2006, if not earlier, due to the mass of non-performing loans in Chinese state banks. Much to the chagrin of Chang, China is still standing. It must give Chang heart palpitations that the Chinese economy grew more than three times since he penned his doomsday book. To add injury to irony, instead of a China syndrome caused by the meltdown of Chinese banks, a non-performing global financing firm called Lehman Brothers started a chain reaction in 2008 that brought the world financial system to the brink of nuclear winter.

China ranks as the world’s third largest economy since it passed by Germany in 2007. China is likely to overtake Japan to become the world’s second largest economy, either this year or by 2010. In the world of Gordon Chang, all this growth must be as real as a Gucci bag at China’s notorious fake markets.

Today, Chang wrote a piece in Forbes, titled “China’s 8.9 Percent Growth? No Way.” In it, Chang puts Chinese growth statistics to task. A country that should have collapsed by 2006, if not earlier, simply is not entitled to 8.9 percent GDP growth, Chang decides. And so, “it is unlikely that 3Q expansion was anywhere near the claimed 8.9 percent.” Chang thinks the number doesn’t jibe with other numbers. As a China expert, he should know that Chinese numbers never jibe, China simply can’t keep up with its 1.3b people, which most likely are 1.5b anyway. Chang could have simply claimed that the growth number is made up. But this would have made for a short column. And so Chang asks:” How can a country have robust consumer sales, nagging deflation and rapid monetary expansion all at the same time?” Chang comes to a simple, however unproven and unsourced explanation: “Vast quantities of consumer goods are now sitting in warehouses.”

And wait until Chang gets to car sales: “While optimistic analysts point to astounding car sales–up 70.5 percent in July, 94.7% in August and 83.6 percent in September,” Chang hears “yet unconfirmed” stories that “central government officials have ordered state enterprises to buy fleets of vehicles and that these businesses are storing them in parking lots across the country.” He can’t come up with proof for this assertion either. However, here is the smoking gun, Gordon Chang style: Gasoline sales are “up only 6.4% in August, for instance.” Chang is baffled: How can car sales go up 94.7 percent in August, when gasoline sales go only up by 6.4 percent?

We aren’t expecting Chang to come up with better numbers than the Chinese government. However, we can expect at least a baseline precision from the Forbes-brand capitalist tool.

China had some 168m motor vehicle registrations (all kinds that use gasoline) by the end of September of 2008. For the first nine months of the year, China’s vehicle sales increased 34.2 percent from some 7.2m sold in the first nine months of 2008 to 9.66m sold in the first nine months of this year. 9.66m additional cars on China’s streets, if we ignore the scrapping rate. China added 5.4 percent more cars to its car park. If gasoline consumption rose by “only 6.4 percent in August,” then that’s in line with the growth. I just got home from being stuck for two hours in murderous Beijing traffic. I can attest and certify that they do drive around a lot more than last year in a lot more cars than last year.

If his basic math skills are as bad as above, no wonder that Chang’s predictions never pan out. North Korea hasn’t attacked Japan either with nuclear rockets as predicted in Chang’s book “Nuclear Showdown.” And that’s a much simpler calculation than tracking cars.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Mark MacInnis Mark MacInnis on Oct 26, 2009

    @wsn "Unless the lender can put a gun to the face of the borrower’s face to have his money back. But that’s not the case here." Perhaps not. But it will be interesting in, say 2012 (if not before), when China makes its penultimate move on Taiwan. Anyone fancy a wager on the "level of commitment" of the US to "protecting Taiwan's freedom"....after years of China propping up the US economy by buying our worthless paper? Hard to fathom the Chinese allowing us to point a weapon at them that THEY ARE PAYING FOR.... So, down goes Taiwan....and Buick sales for that matter.

  • Tosh Tosh on Oct 27, 2009

    Sniff...choke...I'm just so proud of TTAC that a rational discussion could spring forth based on what a neo-con right-wing fear- and hate-mongering entertainment show host and guest said on some propaganda network....snort....I love you guys.....bwaaaa....!

  • Varezhka The biggest underlying issue of Mitsubishi Motors was that for most of its history the commercial vehicles division was where all the profit was being made, subsidizing the passenger vehicle division losses. Just like Isuzu.And because it was a runt of a giant conglomerate who mainly operated B2G and B2B, it never got the attention it needed to really succeed. So when Daimler came in early 2000s and took away the money making Mitsubishi-Fuso commercial division, it was screwed.Right now it's living off of its legacy user base in SE Asia, while its new parent Nissan is sucking away at its remaining engineering expertise in EV and kei cars. I'd love to see the upcoming US market Delica, so crossing fingers they will last that long.
  • ToolGuy A deep-dive of the TTAC Podcast Archives gleans some valuable insight here.
  • Tassos I heard the same clueless, bigoted BULLSHEET about the Chinese brands, 40 years ago about the Japanese Brands, and more recently about the Koreans.If the Japanese and the Koreans have succeeded in the US market, at the expense of losers such as Fiat, Alfa, Peugeot, and the Domestics,there is ZERO DOUBT in my mind, that if the Chinese want to succeed here, THEY WILL. No matter what one or two bigots do about it.PS try to distinguish between the hard working CHINESE PEOPLE and their GOVERNMENT once in your miserable lives.
  • 28-Cars-Later I guess Santa showed up with bales of cash for Mitsu this past Christmas.
  • Lou_BC I was looking at an extended warranty for my truck. The F&I guy was trying to sell me on the idea by telling me how his wife's Cadillac had 2 infotainment failures costing $4,600 dollars each and how it was very common in all of their products. These idiots can't build a reliable vehicle and they want me to trust them with the vehicle "taking over" for me.