The real story behind China's shadowy economic numbers

China's 2014 economic numbers came in (relatively) slow, with a reported 7.4 percent GDP growth rate. The headline is that it's the slowest pace in 24 years. What does it mean?

First: not much. By definition, a single GDP number, by itself, will not tell you much about an economy. This goes for any economic indicator without context.

Second: China's GDP numbers tell us even less, because the dirty secret of official Chinese economic statistics is that they're pretty much all fake, or at least airbrushed. This is one communist tradition that the Chinese government hasn't given up. Each year, the party sets a GDP target, and it hits it. Isn't that wonderful? This year, the big news is that the target was missed — but by just a tenth of a percentage point, 7.4 percent instead of 7.5 percent. Given that everyone knew China's growth was slower than the government's target and and that they would have laughed off a direct hit, that's just a bit too cute.

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But, third, that actually makes this number interesting. Don't think of it as an economic data point — think of it as a press release from the Chinese government. Seeing it this way does actually tell us something.

The key question you'll hear about China's economy is this: hard landing or soft landing? Meaning, everyone knows China's economy is overheated, with massive real estate and credit bubbles. The question is, will it all come crashing down like a house of cards, or can the Chinese government somehow manage a gentler fall?

The GDP number is the Chinese government saying to international investors: "Yes, we know we have problems, and we have to deal with them — so trust us, we got this. We're not in denial." This is the wisest course, if only because perceptions matter. If international investors thought a hard landing was likely, they would all rush for the exits, which would create a self-fulfilling prophecy. Better admit that things aren't going as well as one would wish and lose some face, rather than risk appearing in denial and scaring off investors.

However, since it is so keen on conjuring the perception of a soft landing, this tells me the Chinese government is absolutely terrified of a hard landing. Because, of course, a hard landing would not just have economic consequences, but political ones as well. China's unwritten social contract is that the people will not contest the regime as long as the regime delivers growth and jobs. And for all the Western stories about China's astonishing growth and world-bestriding companies, the fact of the matter is that China is a society that is being profoundly dislocated by many forces — urbanization, rising inequality, corruption, pollution, demographic imbalances, authoritarianism — and the only thing holding it together is the massive, constant surge of growth.

From the outside, China's leaders look to Western pundits like masterful statesmen. But from their own perspective, they are rodeo riders hanging on for dear life.

The truth is that the laws of economics and human behavior do not seem to be on the side of a soft landing. They rarely are. In theory, the U.S. could have had a soft landing from its own housing bubble, but that didn't happen. Even at the height of the doctom bubble, most people were aware that dotcom valuations were unsustainable — they just expected a soft landing, not a sudden crash. Whether it's the psychology of crowds, or the gods' wicked sense of humor, this is how these things work.

I do not have a crystal ball. But the economic record of authoritarian technocrats saddled with corrupt bureaucracies is not good.

But, hey, look on the bright side: China only missed its numbers by one tenth of a percentage point.