Controversy in China’s GDP Growth

Published on Author quinn

Controversy surrounds the accuracy of China’s economic data, with many believing that the GDP growth for 2012 fell below the reported rate of 7.8%. With members of the Dallas Fed disagreeing with the reported results, the San Francisco Fed decided to take a look at the numbers, comparing “commonly cited alternative indicators of economic activity with China’s GDP data to look for signs of exaggeration” with the country’s growth rate. In order to get more accurate results, researchers created 2 growth indices. [For?] the first index, Li Keqiang investigated rail freight, electricity output, and loandisbursement. The second was based on “consumer sentiment, construction of new floor space, raw materials usage, air passenger volume, and new residential real estate construction.”
In order to be sure the original data was not altered, the researchers made an additional two indices, a “trio” index based on trade data accounting for global exports from China and a “world” index measuring Chinese trade activity. Based on their findings, the San Francisco Fed announce that they “find no evidence that China’s slowdown in 2012 was greater than officially reported.” However, researches at the Dallas Fed believe that “China might have overstated its 2012 industrial production data to mask the economy’s weakness. In other words, the slowdown in China could be worse than the official data indicate.” With the two branches of the Fed coming up with opposing conclusions, it is likely there will be further investigation concerning the reliability of China’s data concerning 2012 GDP growth.

One Response to Controversy in China’s GDP Growth

  1. Tom Rawski of our textbook was the first to highlight this issue, looking at the inconsistency between provincial and national data, and between things such as electricity use and rail transport volumes that seemed out of line. The system is improving, as data no longer are collected by those who are evaluated on the basis of the numbers (provinces would supply data to Beijing, but leaders were judged on the basis of growth rates – a conflict of interest where they had the upper hand via control of the numbers). There’s also more experience, and cheap computing power helps, backed by many more types of data. Check the China Statistical Yearbook to see if you can spot oddities, and observe the increase in coverage over the past decade.

    There is also an implicit recognition of [poor] quality: you can’t get quick quarterly reports of GDP. Such data are even hard to compile in the US (Congress doesn’t fund despite complaints by the business sector). China makes no claims to do it well. The question is whether they deliberately manipulate data. There’s no strong evidence of that.