Casting doubt over the accuracy of China’s GDP figures has become a favourite pastime for many in financial markets.
Like clockwork, the government’s figures tend to match or slightly exceed expectations, defying doomsayers who believe the economy is growing significantly below the 6.9% pace reported for 2015.
It’s drawn scorn and ridicule from many noted market participants, particularly outside of China, who suggest that the figures are merely a by-product of the government starting with the headline figure first and then working backwards, rather than the other way around.
As the chart below reveals, the annual growth rate reported by the government, particularly in recent years, has been remarkably stable, an oddity given subdued economic conditions seen elsewhere around the world.
To an increasing number it all but confirms that the data is spurious, allowing the government to portray a sense of stability and strength when the reality is likely opposite.
According to Xu Dianqing, an economics professor at Beijing Normal University and the University of West Ontario, the government’s figures are almost certainly overstating the true growth rate for the economy, suggesting that China’s economic growth rate might running at just 4.3% to 5.2%.
Speaking to a media briefing earlier this week, Xu told the Wall Street Journal that the focus of his concern is the growth rate for China’s manufacturing sector, which according to official figures grew 6.0% last year and accounts for 40.5% of the economy.
Citing thermal power generation, railway freight volume and industrial output figures released by the National Bureau of Statistics each month – alternate growth indicators – he suggests that underlying indicators suggest that the economy is not growing anywhere near the official rate reported.
Xu believes that the 6% expansion reported for secondary industries was questionable “no matter how the number is counted”, suggesting that it’s more probable that industry and construction grew at most by 2% last year and perhaps not at all.
Based on that assessment, encompassing 40.5% of economic output, he suggests that the economy likely grew at most 5.2% in 2015.
As for the main growth engine for China’s economy in 2015, the tertiary sector, Xu suggested that it’s unlikely that it performed better than the 8.3% growth rate reported by the government.
The assessment from Xu, along with reports that past growth figures were made up at a provincial level, will no doubt add to concerns over the accuracy of Chinese economic data
In an attempt to hose down speculation that the figures are rubbery, Wang Baoan, the head of China’s National Bureau of Statistics, told reporters following the release of the December quarter GDP report – something that came just 19 days after the survey period ended – that its economic data was “valid and reliable” with its methodology in line with “global standards”.
While an attempt to bolster sentiment towards the accuracy of the data, the very fact that a leading official was forced to defend the data suggests that China knows that it has mounting credibility problem.
You can read more from the Journal here.