Shaun2Shaun Rein by Fantake via Flickr

The story that China will collapse sells books and magazines, but according to Shaun Rein the bubble in the real estate is not going to be that trigger. In Forbes he tells why some of the doomsday sayers are wrong:

Why? Because China’s underground economy is far bigger than the 10% to 20% of the total economy that most economists estimate when they do their calculations. Politically the government can’t admit that. A decade ago the U.S. Treasury estimated that 50% of Russia’s economy stayed underground, evading onerous taxes. China’s underground economy as a portion of the overall economy is at least as large as Russia’s. Many company executives keep three sets of accounting records: one for official purposes, one for investors and one for themselves.

It does not mean Shaun Rein is taking all the figures that are published for granted: he accept that much of the basic data collection do have serious flaws:

It would be politically impossible for the government to say just how large the underground economy is without causing clashes among the responsible ministries. The government is, however, actively cracking down on receipt forging and tax evasion and is implementing new tax and receipt policies that will force cash businesses like restaurants to pay more based on their actual business results.

It is true that certain sectors in China’s economy are overheating and that there are structural economic issues that need to be addressed. But predictions of doom and gloom in China by Jim Chanos and his ilk are largely exaggerated. China is no Dubai. The growth is real.

Shaun Rein is a speaker at the China Speakers Bureau. When you need him at your conference, do get in touch.

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