What’s the true measure of China’s growth?

By Wei Gu
December 10, 2010

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

HONG KONG — China’s growth is real, but even the nation’s leaders aren’t sure how to measure it. The man expected to be China’s next premier thinks GDP data is unreliable, and he prefers electricity usage as a measure of economic expansion, recent disclosures from Wikileaks say. But as China transitions to a more services- and consumption-based economy, energy data will be a less useful indicator and leaders need to start looking elsewhere.

It is true that Chinese data is often too imprecise to be relied upon. The government releases quarterly GDP with impressive speed — just three weeks after the quarter finishes. It takes U.S. bean-counters eight weeks to do the same job. The Chinese GDP data look bare-boned.

Sometimes Chinese data don’t even agree with each other. The statistics bureau found house prices grew only 1.5 percent in 2009. The Ministry of Land and Resources’ estimate of 25 percent looks closer to the truth. The problem may be garbage in, garbage out: the statistics bureau relies on surveys of developers rather than hard transaction data.

It is reassuring to a degree that top Chinese leaders are seeking alternatives. Premier Wen Jiabao has previously said he likes to use electricity usage. The Wikileaks cables show that his likely successor, Li Keqiang, looks at rail cargo as well as electricity. Those measures might work to a certain extent in the Liaoning province, a big producer of steel and petrochemicals, where Li used to work. But they are less useful for the whole nation.

The make-up of the Chinese economy is changing. Industries contributed 46 percent to GDP in 2008, down from 58 percent in 2000. About 43 percent GDP came from services in 2008, versus 35 percent in 2000. China’s efforts to be more energy efficient may also complicate matters.

A wider range of consumption measures needs to be considered when assessing China’s economic growth using ad-hoc observations. Car sales, for example, are already a big growth driver; there is good industry association data. The same goes for movie screenings or sales by leading e-commerce websites. But at least Li — an economist PhD — recognises the need for imagination.


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Even the leaders of China government noticed statistics bureau data are too impresise to trust or use, they can not find out a useful way to figure it out so far.

If the top guys really want to get China economy grown smoothly and heathly, they must reconsider government system change, that is the root of all the problems of current China.

Posted by Xiaowei | Report as abusive

To some measure, I would have to agree “that GDP data can be inaccurate,” however, measuring growth through electric grid usage is not the answer as the concept of “industry-efficiency” and operational costs may vary and will corrupt any analysis. I would also agree that China’s growth is “real” but a great percentage is internal and centers around improved infrastructure to support manufacturing, and to modernize cities; given this reality, I for see inflation becoming a problem for a growing nation with questionable monetary policy. And if we couple this uncontrolled growth and inflation with a mounting global environmental and geopolitical concerns, China could be facing major political and economic issues! If this occurs, the US could find itself in more or prolonged economic crisis due to the massive loans that we hold from China.
Another concern for China is it’s workforce where there’s been a very rapid migration from an agrarian society to manufacturing/heavy-industry and now to high-tech; some would say that a great segment of the population are Il-prepared leaving most to be displaced. As this scenario takes root, I would question the government’s commitment and the existence of a viable social program to cope with the needs of 100’s of millions.

Posted by DonPresnellMBA | Report as abusive

One believes one’s eyes. While world’s fastest train recently run in China successfully and the newly build bridge collapse during CWG in Delhi speaks the true measure of growth. All illusions vanish!

Posted by vksaini | Report as abusive

Chinese municipal leaders invariably regard themselves as CEOs running their districts as national enterprises. They don’t want to be looked down on by their peers.

The ensuing result is all figures are “baked”, full of cavities, just as the conglomerates overstating profits but understating pollution.

Posted by leungsite | Report as abusive

With some estimates of a $123 trillion economy coming in a few decades, someone must measure things right, and the growth in services can mean jobs from the US and other nations, and also competition with India.

Posted by BillyW | Report as abusive

I am a bit concerned about the fact that you can , in the same article, critize (rightfully) Chinese economic data and quote these figures (the industries percentage in the Chinese GDP) as a proof for your demonstration.
What seems to be evident is that:
– “there are lies, damned lies and Chinese statistics”
– Chinese leader understanding of what is at stake in the current huge financial buble they helped to creat, is ..at least.. weak (electricity, trains, ???)
– the worse is still to come

Posted by Sdeverre | Report as abusive