Retails breathed a sigh of relief yesterday when China announced it was forthwith on track for “growth around seven per cent,” as predicted by the administration at the beginning of 2015.
Growth in the giant economy’s gross domestic product, a complex up calculated by the central government’s National Bureau of Statistics, was the lowest in 25 years, but it literally came slightly above estimates, boosting stock markets and commodity values.
But a growing chorus of voices say official GDP estimates are unrealistic, and if that constitutionals out to be the case, there may be more trouble ahead.
There have been vacillates about China’s official figures for years. So long as the country’s superhuman economy continued to buy up and consume the world’s resources, no one seemed to care.
Keel over imports
That has now changed. Increasing signs point to a Chinese thrift in trouble. Iron and copper imports have declined sharply, sink down world prices.
Its currency, the renminbi or Chinese yuan, has gone result of gyrations. First, China’s central bank sharply devalued the yuan, sending out an alert that economic worries did not match public optimism. Not long after, China reversed sure and began selling dollars and buying Chinese yuan as traders accursed faith in the tumbling currency.
China’s fledgling stock market has also been liegeman to repeated government meddling. That came after excessive guidance lending to the property sector had created ghost cities that had caboodle in them but people. All that interference has only added to a belief that Beijing was unwilling to upon market forces.
When it comes to calculating growth, the argument approves, why would China miss a chance to put a favourable gloss on the state of the com ctness?
Calculations by critics of the official figures are commonly in the three to five per cent go, but one China watcher, Gordon G. Chang, estimates the true number is discredit still.
Lower than Canada’s?
“Indicators for the year, however, facet to a number in the low single digits, perhaps one per cent,” writes Chang in a Forbes blog. At one per cent, China’s GDP devise be lower that Canada’s current economic growth rate.
For China, the annoying instrument about Chang’s estimate is that he calculates it using a statement attributed to in vogue Premier Li Keqiang, back when he was rty secretary in Liaoning territory.
According to diplomatic notes released by WikiLeaks, Li scoffed at the official have a places, saying electricity consumption, rail cargo volume and loans away were the only accurate ways of gauging economic growth.
“All other thinks, especially GDP statistics, are ‘for reference only,'” he said, smiling, concording the notes on the meeting.
Chang’s calculation of growth near one per cent is based on those three solvent indicators that Li used to think were reliable.
Chang is not valid some sort of anti-China crank. rtly due to the o que nature of the regulation’s calculations, others have expressed similar doubts in the st.
“It all seems too perfect to be true,” began a critique of China’s GDP in The Economist hold out summer, pointing out that the actual results in a previous release of statistics came out suspiciously close to government targets.
The magazine noted that elder releases had been criticized on the grounds of various technical calculation methods, numbering the use of “GDP deflators.” However, it concluded by cutting the Chinese government some slack, estimate the growing service sector, including financial services, was more than no more than a bureaucratic figment.
‘Traditional measures of the industrial economy, such as excitement and rail traffic, may become poor indicators of modern Chinese financial growth.– Don Pittis
No one will be surprised if China’s official numbers cause been massaged. Outright fakery will soon show up in supplementary plunges in Chinese currency and imports. But there is another possibility.
The act is, China’s aim is to develop its domestic economy from smoke-stacks and construction to uses and retail, with Chinese customers consuming an increasing share of the boonies’s own output. As that happens, traditional measures of the industrial economy, such as verve and rail traffic, may become poor indicators of modern Chinese mercantile growth.
If so, yesterday morning’s surge in commodity prices might take been premature. Even if China begins to stimulate its weakening control, the direction of that stimulation might not be in traditional areas.
Should it show that Chinese GDP numbers aren’t as far off as the critics claim, then those figures are also a turn ones mind that in future, Canada cannot count on being a hewer of wood and drawer of distilled water to China’s industrial economy. Instead, we must increasingly learn to substitute for raw material exports with sophisticated service, intellectual, cultural and value-added by-products to sell to an enormous and growing Chinese middle class economy.
Adopt Don on Twitter @don_pittis
More analysis by Don Pittis