TAIPEI (Taiwan News) — Chinese American YouTuber Lei from “Lei’s Real Talk” spoke with Taiwan News on Thursday (July 20) on her assessment of China’s economic and political situation and its implications for Taiwan.
Lei, who prefers not to use her full name to protect her family in China, said she immigrated to the U.S. from Shanghai in the 1980s, but keeps in close contact with friends and relatives in China. After working as a financial analyst for 15 years, she started her YouTube channel during the pandemic to help the Western world better understand China, the Chinese Communist Party (CCP), and the Chinese people.
Lei talked about China’s actual GDP, real growth rate, and high unemployment numbers. She explained why she believes the Taiwanese are wealthier than the Chinese, why the CCP feels compelled to invade Taiwan, Beijing’s military strategy toward Taiwan, and indications that Chinese leader Xi Jinping (習近平) is dealing with internal chaos.
Based on a University of Chicago study, Lei estimated that China’s actual GDP is likely to be less than half its official numbers. She also used the methodology from the study to estimate that instead of growing at over 12% annually between 1992 and 2022, it likely grew at about 8% annually.
As for 2023, Lei doubts that China’s economy is posting any growth at all. Lei cited an article by a Chinese researcher estimating China’s youth employment to be as high as 50%.
Lei asserted that the Taiwanese are wealthier than the Chinese, based on a 2022 report that listed Taiwanese households as the wealthiest in Asia. She also argued that the Taiwanese are richer because they have freedom of speech, freedom of choice, a true market economy, a transparent legal system, and no need to align every decision with a single political party.
She said that when the Empress Dowager abdicated the Qing Dynasty, she handed over the mandate to rule China to the Republic of China (ROC). According to Lei, because it still exists in Taiwan, the CCP believes that it does not have the mandate to fully rule China, and therefore it must defeat the ROC by seizing Taiwan.
When asked about the timing of a possible Chinese invasion of Taiwan, Lei said that Beijing is likely biding its time and will instead try to use subversion and coercion to gradually take over the country. This includes the manipulation of political parties that favor China to make Taiwanese unwittingly cede sovereignty to Beijing.
Lei said that if an invasion takes place, the timing will depend on when Xi feels like his window for opportunity is closing. In general, Lei said that China’s tactical decisions regarding Taiwan have been reactive and not proactive.
Regarding the inner workings of the CCP, Lei said that there is a struggle between different camps in the party. Some groups favor Xi entering a war because they believe he would fail and it would lead to his downfall, while others oppose Xi because they do not want to be in the crosshairs of U.S. missiles.
Lei said the recent deaths and disappearances of senior leaders of the People’s Liberation Army Rocket Force (PLARF) are significant because they are the “princelings” of the CCP and had previously been immune to Xi’s purges of opponents. She said that this indicates that there is serious dissent between Xi and senior commanders in the rocket force.
1. What would you estimate is the actual size of China’s economy, and what do you think is the real growth of its GDP over all these years?
Well, that is a question that a lot of us have been thinking about. I think China stated its official GDP is at, what, US$18 trillion for 2022.
I did a program, I think it was in April that recalculated China’s GDP based on a couple of different methods. I think China’s GDP is between US$5 trillion and US$9 trillion.
US$9 trillion, I think is half of US$18 trillion. I mean, that is just a rough estimate without going too much into the details. But I think China’s GDP is really around the same GDP as Japan, which is five, US$5.2, and US$5.3 trillion.
2. What are some of the sources you drew on to come to that conclusion?
There are a couple of sources I used. One is a study by a professor called Louis Martinez. He is at the University of Chicago.
In July 2021, he released a study in which he studied the night lighting captured by satellites. I think it is either 184 or 148 countries, but over a hundred countries.
And he compared autocratic countries to democratic countries. You find that there is a pattern, like when the night lights grow, that the growth corresponds to the GDP growth, so they correspond with each other.
However, for autocratic countries, the GDP growth seems to be overstated by 35%. So he concluded that there is a 35% deflator factor that should be applied to autocratic countries.
And if you look at the autocratic countries, China is the one that is most obsessed with GDP. So I think its deflator is maybe more than 35%.
3. Now on the same subject, what about GDP growth, that number we get every quarter? What do you estimate the more accurate number would be?
Right. I calculated it. So I compared the GDP that China had in 1992 versus 2022. So, over 30 years, the compound annual growth rate, based on its official numbers, is 12.7% annual growth.
That’s a compound average annual growth. So, if I apply Professor Martinez’s deflator factor, it should be around 8.25% and 8.25%, a tremendous annual growth factor.
I mean, if you think about it, an economy that has been growing at over 8% consistently for 30 years, that’s amazing. But that would bring China’s GDP to US$5.3 trillion, not the US$18 trillion that it states now.
4. What would you say the GDP growth rate would be so far this year?
I think since the pandemic, China’s GDP has not been on an uptick trend. It should be on a downtick trend. But of course, the entire world has not been talking about contraction.
We just heard last week that Citibank, JP Morgan Chase, and Goldman Sachs have lowered China’s GDP projection for this year from 5.5% to 5%. So they are still talking about growth when I think we have not seen any growth.
5. Right. I think their inflation is at 0% for June. So that sounds like zero growth or something like that.
China’s economy is in a very strange situation, you know, as the rest of the world experiences inflation when the government prints more money, China has deflation, you know, which is really bad.
That means as the government pumps more money into society, it does not trigger any demand for commodities, and prices continue to go down. That means its economy is in a serious problem.
6. On that subject, what do you estimate is the unemployment rate now in China?
When we talk about the unemployment rate, first of all, estimates are for urban populations only. So it excludes the rural population because it assumes everybody who belongs to the rural population must work to make a living.
So I think it was this Monday the government released the official unemployment rate for urban youth, which is what people are concerned about. It’s 21.3%, I think half of a percent higher than May.
But on the same day, there was a professor from Beijing University. Her last name is Zhang (Zhang Dandan), and she released an article (in Caixin) saying that it’s understated. China’s real unemployment rate for urban youth should be 46.5%, and that is more than twice the government’s rate. That article has been going viral in China.
7. I understand that the way they calculate unemployment, as long as you work some minimal amount of time, you are still considered employed. Is that right?
Right, China’s definition is one hour. If you work one hour a week, you are considered employed. And actually, I read on the Internet, I do not know if it is true throughout China, but college graduates are required to find a job in order to get their diploma.
You know, I think this is part of the government’s mandate to reduce the urban youth unemployment rate. So they require all schools to help the graduates to find a job.
You know how they do it? Some schools require graduates to register an e-commerce account so that you have some kind of a transaction and sell something online so that they will be considered self-employed when they graduate.
And that’s how they will get their graduate certificate or diploma. Yeah, I saw that on the internet. I haven’t got time to verify that.
Whether that’s just one case with one school or that’s a common practice throughout China. I don’t know that yet. But that sounds very outrageous.
8. Segueing to Taiwan in China. Why do you think Taiwanese are wealthier than Chinese people?
In 2022, Taiwan became the wealthiest country in Asia, overtaking Japan as the country that has the highest per capita GDP, and Taiwan also has the highest. I think its per capita net worth or net wealth, which was at €138,000, is quite high.
It ranks number one in Asia and ranks number five, I think, all over the world. So that makes Taiwan the wealthiest country in Asia.
Why do I think the Taiwanese are wealthier? Well, first of all, you have a market economy. China doesn’t have a market economy.
And the foundation for a market economy is freedom of speech and freedom of choice. I mean, part of the market economy is that you can obtain information and make decisions on your own to decide what you want to buy and what you want to sell. But the Chinese don’t have that.
And also, in terms of the rule of law, the Chinese don’t have a way to settle disputes. If you have a market economy, you inevitably run into issues where people disagree with each other.
How do you resolve that? So you need to have a rule of law to manage disputes, but the Chinese don’t have that.
Last but not least, I think, here, if you work hard and if you’re talented, you can do pretty well. But that’s not the case in China.
I mean, in China, you have to be politically aligned correctly. You have to have the right connections, right?
So, just because you are smart and you work hard does not mean that you can do well.
9. I think another aspect is the fact that people here can actually own the land. Whereas in China, it is really just leased from the government.
Right, you only have the right to use it for a couple of decades, you know, and then the government can sell it again or collect some money from you after that term expires. It’s another way for the government to collect money from its citizens, yeah.
10. Well, speaking of the government, why does the CCP want to invade Taiwan?
I think I want to look at it from two perspectives. One is Xi Jinping. I think politically he has the ambition to establish himself at the same level as Mao Zedong and Deng Xiaoping.
So Mao Zedong was successful in driving the Kuomintang to Taiwan and out of the mainland. And then Deng Xiaoping was successful in getting Hong Kong and Macau back.
And so Xi Jinping, for him to establish himself at the same level, he needs to bring Taiwan back because that’s the remaining territorial issue or political issue for the CCP. So that’s just a personal political ambition for Xi Jinping.
Now, in terms of the CCP, the party, or the regime, it has always regarded the Taiwan issue as something that threatens its legitimacy. When the Qing Dynasty ended in 1912, when Empress Dowager issued the abdication decree on behalf of the emperor, who was only six years old, it basically acknowledged the will of the people.
I read that document earlier today. It’s very interesting. I recommend your viewers go read it. It is basically said that, based on people’s hearts, people want to have a republic.
And she also mentioned in that document the prime minister at the time, Yuan Shikai, and she named him to be in power to manage the transition. The Qing Dynasty ceded its power to the ROC.
The ROC was established on January 1st of that year. So it’s like you have in terms of the political lineage from the Qing Dynasty to the ROC. It was officially passed down from the last emperor of the Qing Dynasty to the ROC.
And then, when the CCP won the Civil War, it did not completely remove the ROC, it just drove them to Taiwan. So all these years you have two governments that co-existed. And so, the CCP feels threatened that if they don’t get rid of the ROC, its legitimacy is at risk. That’s why the Taiwan issue is very important.
11. So speaking of threats, what are some signs in terms of China’s military strategy toward Taiwan?
There have been different discussions or opinions about CCP strategies and different people have different views. I think in general, as much as the CCP wants to take over Taiwan, it’s very careful not to start a military conflict with the United States because the chances for it to win are not great.
So we talked about Deng Xiaoping from years ago, decades ago, and came up with this strategy called a blockade. It tries to isolate Taiwan and stop supplies from being sent to the island. I mean, resources, energy exports, imports.
So it tries to put pressure on Taiwan and gradually through coercive measures or infiltration, and gradually take over Taiwan in that sort of a manner. But it tries very carefully not to start a military confrontation.
I would say that would be CCP’s strategy. Even during the Civil War in the 1940s, the CCP did not win because it was militarily stronger. It’s just because it had successfully infiltrated Chiang Kai Shek’s government. That’s how it won.
It’s not because it had a better military strategy. So espionage, spy infiltration, these tactics are what the CCP does best. They used it successfully for themselves and I think it’s going to apply those tactics again.
12. So probably it is just biding its time. Then, possibly hoping that someone else will make a mistake like the U.S. or Taiwan will make some sort of mistake that gives them a chance, gives them the excuse to use force.
Yeah, I think it will gradually (increase) pressure on the island. I mean, the election is coming up. I mean it obviously wants the Kuomintang to win because it feels like it has more control or influence over the Kuomintang.
It will gradually get you into a position that one day you’ll realize I’ve already ceded my power to you. You know, that sort of tactic, and this is what the CCP is very good at, but it’s done very subtly and very gradually over time. And hopefully, Taiwanese people can recognize that.
13. Now the question everyone asks is when is it going to happen? Now, it sounds like you are saying it is not that likely. But do you think there is a timeline for an actual invasion, that kind of thing?
Well, I think Xi Jinping, without a doubt, wants to complete his Taiwan mission right during his term. The question is, how much time does he have? You know, if he’s sure that he can rule the mainland for the rest of his life, then he probably has more time.
But if he feels like he only has five years left, of course, he wants to complete that mission before his term ends. A lot of people ask, is war imminent?
That’s the question many people ask. If you look at the CCP’s politics in the past couple of months, a lot of its decisions are very highly reactive. It’s not proactive.
I mean, the proactive plan is to take over Taiwan. That’s just the big plan.
But tactically, it’s been doing a lot of reactive things. So I tend to believe that the decision to invade Taiwan, or if there is one, will be a reactive decision.
14. So what kind of impetus do you think would cause them to react that way?
Well, there will be no external (factor). I think it will be reactive to its own internal political chaos and power struggles because, in the outside world, I don’t think the Taiwanese would declare independence. I mean, that’s highly unlikely.
I don’t think the United States wants to start a war with China. So those external factors, you know, in terms of starting a war are non-existent, from my perspective.
The only factor that matters here is the CCP’s own internal political struggle and political stability. Within the CCP’s factions, Xi Jinping’s political enemies want him to start a war and fail.
Not everyone within the PLA is against war, although some are. And then these people could create all kinds of situations or incidents that force Xi Jinping to take certain actions against his will.
So, I think the political instability and the internal chaos is something that we need to monitor carefully. Just like the balloon incident, it came from nowhere, but it suddenly became a major event that disrupted Sino-U.S. relations.
So I think we don’t know what’s going to happen next. Somebody set up something that forces Xi Jinping to do something reactively and that could trigger a bigger crisis.
15. From your assessment right now, do you think the situation is more chaotic or stabilized in terms of Xi and his inner circle?
I think it’s very chaotic. I mean, just take a look at what has happened to the foreign minister (Qin Gang). His absence has made international headlines and also the passing of the deputy commander of the rocket force, Wu Guohua.
I mean, he has died. The official obituary said that he died from a brain hemorrhage. But there are so many rumors saying that he died from suicide.
His sudden death, and also the fact that the commander of the rocket force is being investigated or has disappeared, and the former deputy commander has been investigated. So if you put all these things together, that means there’s some kind of internal upheaval happening, if not within all of the PLA, but at least within the rocket force.
So all these rumors popping up are telling me Xi Jinping is going through some internal crisis right now. And also another thing that I just saw today was the PLA media. The Chinese military media used to talk about its rocket force, the navy, the air force, you know, a lot.
And recently, suddenly, it just stopped talking about the rocket force. And you wonder, well, there must be something going on, right?
If you hear just a little bit of information or rumors here and there, you think, okay, maybe that’s just accidental, maybe that’s just a rumor. But when you put all of this together, then you think hmm it cannot be all rumors or all accidental.
Something must be happening. So this is what I can gather.
16. Why the rocket force? Do we have any idea why that particular unit was targeted?
The rocket force is supposedly the most special force because it was established in secret. It was a secret force established by Mao, actually during the Cultural Revolution.
Lieutenant Colonel Yao Cheng, I don’t know if you are familiar with him. He is a former PLA Navy officer, and he has recently given a talk in the United States. And he said the reason the rocket force is in trouble right now is because they understand that if a war breaks out in the Taiwan Strait, they will be the first target of attack by the United States.
And according to him, he said the United States does not care so much about the PLA Navy or the PLA Air Force, but it does care about the rocket force because it has nuclear missiles and all of that. So that’s why the officers in the rocket force are very concerned about their future well-being because they know that they will be the target.
And the antiwar sentiment within the rocket force is very strong.
17. They are the ones that are the last vestiges of those who are not fully loyal to Xi?
This force traditionally has been believed to be an elite force that’s run by princelings. So they feel special.
It’s a prestigious troop within the PLA. I mean, at least they see themselves that way. And all of a sudden, they’re being put at the forefront of the war.
And also, Xi Jinping’s recent anti-corruption baton has hit quite a number of princelings within the PLA, you know, fear of war and also resentful of the sacking of certain princelings within the PLA. So it just, you know, makes these people a little bit not happy with what the commander in chief is doing.
