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