China reports solid economic growth. Should we believe it?
China announced that GDP growth in the last quarter of 2011 was 8.9 percent, which suggests China will have a soft landing as its economy cools. But what's behind the numbers?
When you want to know what is going on in the Chinese economy, where do you look?Skip to next paragraph
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Paul Cavey studies excavator sales.
What might seem an arcane detail is actually “a real indicator” of economic trends, says Mr. Cavey, a China analyst at Macquarie Bank. Digger sales point to likely construction, which is a big driver of Chinese economic growth, he notes. “You can’t draw macro conclusions from those figures,” he acknowledges, “but they serve as a sense check of official data.”
That’s important when the official data paint a conveniently rosy picture, such as Tuesday’s announcement that GDP growth in the last quarter of 2011 was 8.9 percent, marginally more than expected, which suggests China will have a soft landing as its economy cools.
That news was good, and it mattered: It lifted stock markets across Asia. But was it true?
Not for Derek Scissors, a researcher at the Heritage Foundation in Washington who dismissed the figure as invented “nonsense … just a PR exercise and a piece of theater.” Mr. Scissors pointed to discrepancies between reportedly solid GDP growth last year and sharp slowdowns in the growth of auto sales, ship orders, and oil imports.
Other experts who also earn their living by poring over Chinese government figures are less dismissive. “Economic statistics are more of an art than a science, but Chinese statistics are reliable enough for practical purposes,” says Arthur Kroeber, head of the Dragonomics economic consultancy in Beijing.
Can you trust the data?
“There’s huge uncertainty over what the data means and whether it can be trusted,” Tom Orlik told reporters recently, introducing his book “Understanding China’s Economic Indicators.”
“When people think of the production of economic data in China,” he added, “they think about a couple of drunken Communist party officials … picking the number that best fits their own political needs.”
Once, he recalled, that was not far off the truth. The manipulation of economic data for political ends has a particularly tragic history in China: 30 million people died of famine at the end of the 1950s when rural officials fabricated grain production figures in order to pretend to meet the government’s absurdly ambitious targets, providing a wholly illusory impression of the nation’s grain stocks.
Forty years later, during the 1998 Asian financial crisis, provincial officials were still massaging the output figures by which their superiors judged them, said Mr. Orlik. Since then, however, “we have seen significant moves to improve China’s data collection system” by centralizing it, he added.
“China’s economic statistics are actually very impressive,” he says, “with relatively timely, accurate, and comprehensive data published on a range of key indicators.”