Derek Scissors, Ph.D. The Heritage Foundation, January 22, 2009 -
China just announced its economic results for 2008. The headline real GDP growth figure was 9.0 percent, featuring a drop to 6.8 percent, year-on-year, in the fourth quarter.The only thing certain about these figures is that they are wrong.
Almost every year, all Chinese provinces report larger GDP gains than the already-published national “average.” This trend held true for the first three quarters of 2008.[1] Over the past decade, all counties within a province have frequently reported larger gains than the provincial “average.” Similarly, basic macroeconomic accounting, such as that used to calculate the components of GDP, does not work with China’s numbers. For political reasons, the PRC knowingly measures a crucial figure for unemployment incorrectly, understating the amount by a factor of two or three.
Beijing purports to be able to complete its annual economic surveys in less than half the time required by the U.S., despite having one billion more people to account for and much less in the way of resources with which to do so. Not surprisingly, then, China now calculates 2007 real GDP growth at 13.0 percent, having first estimated 11.4 percent. These revisions have important implications for assessing the 2008 data.
Official data on the economy are whatever the Communist Party wants–close to the mark, too low, or too high.[2] While surety is impossible, the available evidence indicates true growth for 2008 is far lower than officially announced. Reasons for general cynicism stem from deliberate obfuscation and internal inconsistency in official statistics. Reason to believe official GDP growth is greatly overstated come from old official statistics on GDP and power consumption.
More Reasons for Cynicism
Official GDP is 30.07 trillion yuan (about $4.4 trillion). The revised figure for 2007 was 25.73 trillion yuan.[3] This is a nominal growth rate of 16.9 percent and, thus, an implicit GDP deflator of 7.9 percent. The latter is considerably larger than the 5.9 percent increase in the official consumer price index but not wildly larger. So far, so good.
For the fourth quarter, official data imply GDP was 9.90 trillion yuan. However, this cannot be directly compared to GDP for the fourth quarter of 2007 because there is no revision available for the individual quarters of 2007 but only for the full year. This has been true since China began revising data in 2005–basic quarterly GDP cannot be verified.
Worse, the same is true for all major parts of the economy. Investment and consumption were presumably revised for 2007 because GDP was revised. But changes in these components were not announced, so their fourth-quarter growth cannot be determined either. For that matter, it is not known if official growth for the first three quarters is still correct, for GDP or anything else. Nor will these figures be released in systematic fashion later. Some follow-on revisions spill out unannounced at random times; some are never made public. Chinese economic data is permanently unverifiable……. (to be cont’d)
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