Here’s hoping China has given up data massage

Some sobering stuff from The Economist (yep, even for Alf).

It muses on whether China is overstating its true rate of growth. There are big implications for the world economy if it is – when much of the rest of the world is in or is going into recession, it’s cheering to know some countries are still recording economic growth.

Especially a major country, like China (our second-biggest export market).

Part of the recent optimism in world markets rests on the belief that China’s fiscal-stimulus package is boosting its economy and that GDP growth could come close to the government¹s target of 8% this year.

Some economists, however, suspect that the figures overstate the economy’s true growth rate and that Beijing would report 8% regardless of the truth. Is
China cheating?


As The Economist points out, doubts have long surrounded the credibility of Chinese data and it is widely accepted that GDP growth was overstated during the previous two downturns.

In 1998-99, during the Asian financial crisis, China’s GDP grew by an average of 7.7%, according to official figures. However, using alternative measures of activity, such as energy production, air travel and imports, Thomas Rawski of the University of Pittsburgh calculated that the growth rate was at best 2%.

Other economists reckon that Mr Rawski was too pessimistic. Arthur Kroeber of Dragonomics, a research firm in Beijing, estimates GDP growth was around 5% in 1998-99, for example.

The Economist has published a chart showing the official growth rate against estimates by Dragonomics.

It clearly suggests that “some massaging of the government statistics may have gone on.”

In 1989, the year of political protests in Tiananmen Square, GDP officially grew by over 4% but Dragonomics reckons it actually declined by 1.5%.

China’s growth in the first quarter of this year has led some to conclude that the government is up to the same old tricks. According to official figures, GDP was 6.1% higher than a year earlier. Yet electricity production in the first quarter was 4% lower than it had been a year earlier; in comparison, production grew by 16% in the year to the first quarter of 2008.

The article proceeds to examine the situation, taking note – for example – of a 10% fall in Chinese government tax revenues over the past year, compared with a surge of 35% in early 2008.

But in the upshot, China’s official statisticians are credited with improving their data-gathering methods in recent years and Beijing has introduced new penalties for officials who falsify statistics.

Moreover, there are encouraging signs that the government is prepared to publish politically embarrassing bad news.

The article concludes that many more people are keeping an eye on China than in the past, and the more eyes there are, and the more crucial its economic performance becomes for the rest of the world, “the harder it is for officials to tamper with the
speedometer.”

Here’s hoping they are right.

China took exports worth $6.6 billion from NZ in the year to March 31, up 16 per cent on the previous March year.

It would be a bugger if their economy wasn’t growing as fast as we think.

One Response to Here’s hoping China has given up data massage

  1. I actually enjoyed reading through this post.Thanks.

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