It is China’s disconcerting secret: Its economic slump is much deeper than official data show.
The government says the economy grew by 6.8 per cent in the final quarter of last year, but that is based on an outdated system that measures growth against the same period a year earlier.
Compared to the previous quarter, the method used by most major economies, growth was about 1 per cent at an annual pace and possibly zero, economists say.
“We sharply decelerated in November and December,” said Standard Chartered economist Stephen Green. “There are no clear signals we have accelerated.”
If China’s economy is indeed barely growing, that would dash hopes China, the world’s third-largest economy, might drive the world out of recession. It also means communist leaders face a tougher challenge than outsiders might think as they scramble to stem a flood of job losses and ignite a recovery.
Other Asian economies such as Japan and South Korea are already contracting. Beijing says there are signs its 4 trillion yuan (US$586 billion) stimulus launched in November is taking effect. But its data might be giving companies and investors an overly positive picture of its current health.
Other countries such as the United States and Japan report gross domestic product growth by comparing each quarter with the previous quarter. That requires more number-crunching to adjust for seasonal differences but quickly reveals changes in performance.
The gap is well known to private sector economists, who try to estimate China’s quarter-on-quarter growth based on skimpy government data.
Fourth-quarter expansion from the previous three months was “close to zero,” said Ting Lu, a Merrill Lynch economist. Mr. Green said his early estimate showed it was “basically zero,” though he raised that to 1 per cent at an annual pace after more calculation. Still, he said, growth was unlikely to revive in the quarter through March.
That would be more in line with indicators that show the mainland’s exports and manufacturing shrinking and weakness in investment and consumer spending. The government says at least 20 million migrant workers have lost their jobs.
JP Morgan gave an estimate of 1.5 per cent quarter-on-quarter annualized growth. But its figures also highlight a sharp decline: That rate is just one-tenth of the 15 per cent quarter-on-quarter growth the bank says China achieved in early 2007.
Recent numbers suggest that China’s economy may be regaining some momentum. A key indicator of manufacturing improved in January, suggesting the slump may be bottoming out.
For decades mainland economic data was thought to be heavily massaged.
Local leaders were accused of sending Beijing phony growth figures to make themselves look better. The government was accused of manipulating the final numbers to show it was achieving its goals.
Today, the cabinet’s National Statistics Bureau is regarded as professional and honest but is struggling to keep up with China’s rapid economic evolution. Its small staff repeatedly revises past growth estimates as new data come in.
It was only in 2005 that booming service industries such as restaurants were counted in economic output. That forced NBS to revise a decade’s worth of growth figures. But only annual numbers were revised, not those for each quarter, making it harder for analysts to make historical comparisons.
“China’s statistics system is really in a mess,” said Mr. Lu. “It’s extremely difficult and close to impossible to calculate the quarter-on-quarter growth rate in China.”
The statistics bureau’s boss says it wants to create a reporting system like those of other countries.
“We are doing research right now on setting up this system,” Commissioner Ma Jiantang said last month, though he gave no timetable.
Last month, the bureau made the surprise announcement that it was raising 2007’s annual growth rate from an already stunning 11.9 per cent. That meant China surpassed Germany that year to become the third-largest economy after the United States and Japan – a milestone that went undetected at the time.
For this year, forecasts of full-year growth are as low as 5 per cent - the best of any major country but China’s weakest in nearly two decades.
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Official data masks severity of mainland slump
AP in Beijing
6 February 2009
It is China’s disconcerting secret: Its economic slump is much deeper than official data show.
The government says the economy grew by 6.8 per cent in the final quarter of last year, but that is based on an outdated system that measures growth against the same period a year earlier.
Compared to the previous quarter, the method used by most major economies, growth was about 1 per cent at an annual pace and possibly zero, economists say.
“We sharply decelerated in November and December,” said Standard Chartered economist Stephen Green. “There are no clear signals we have accelerated.”
If China’s economy is indeed barely growing, that would dash hopes China, the world’s third-largest economy, might drive the world out of recession. It also means communist leaders face a tougher challenge than outsiders might think as they scramble to stem a flood of job losses and ignite a recovery.
Other Asian economies such as Japan and South Korea are already contracting. Beijing says there are signs its 4 trillion yuan (US$586 billion) stimulus launched in November is taking effect. But its data might be giving companies and investors an overly positive picture of its current health.
Other countries such as the United States and Japan report gross domestic product growth by comparing each quarter with the previous quarter. That requires more number-crunching to adjust for seasonal differences but quickly reveals changes in performance.
The gap is well known to private sector economists, who try to estimate China’s quarter-on-quarter growth based on skimpy government data.
Fourth-quarter expansion from the previous three months was “close to zero,” said Ting Lu, a Merrill Lynch economist. Mr. Green said his early estimate showed it was “basically zero,” though he raised that to 1 per cent at an annual pace after more calculation. Still, he said, growth was unlikely to revive in the quarter through March.
That would be more in line with indicators that show the mainland’s exports and manufacturing shrinking and weakness in investment and consumer spending. The government says at least 20 million migrant workers have lost their jobs.
JP Morgan gave an estimate of 1.5 per cent quarter-on-quarter annualized growth. But its figures also highlight a sharp decline: That rate is just one-tenth of the 15 per cent quarter-on-quarter growth the bank says China achieved in early 2007.
Recent numbers suggest that China’s economy may be regaining some momentum. A key indicator of manufacturing improved in January, suggesting the slump may be bottoming out.
For decades mainland economic data was thought to be heavily massaged.
Local leaders were accused of sending Beijing phony growth figures to make themselves look better. The government was accused of manipulating the final numbers to show it was achieving its goals.
Today, the cabinet’s National Statistics Bureau is regarded as professional and honest but is struggling to keep up with China’s rapid economic evolution. Its small staff repeatedly revises past growth estimates as new data come in.
It was only in 2005 that booming service industries such as restaurants were counted in economic output. That forced NBS to revise a decade’s worth of growth figures. But only annual numbers were revised, not those for each quarter, making it harder for analysts to make historical comparisons.
“China’s statistics system is really in a mess,” said Mr. Lu. “It’s extremely difficult and close to impossible to calculate the quarter-on-quarter growth rate in China.”
The statistics bureau’s boss says it wants to create a reporting system like those of other countries.
“We are doing research right now on setting up this system,” Commissioner Ma Jiantang said last month, though he gave no timetable.
Last month, the bureau made the surprise announcement that it was raising 2007’s annual growth rate from an already stunning 11.9 per cent. That meant China surpassed Germany that year to become the third-largest economy after the United States and Japan – a milestone that went undetected at the time.
For this year, forecasts of full-year growth are as low as 5 per cent - the best of any major country but China’s weakest in nearly two decades.
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