China’s official growth rate for the first quarter of 2016 was 6.7%. Its official growth rate for the second quarter of 2016 was 6.7%. Now in recently released official numbers its growth rate for the third quarter of 2016 was 6.7%. One of three things is likely to be true.
- It’s an amazing coincidence. Unlike every other country in the world where growth rates vary over time China’s growth rate actually was 6.7% in each and every quarter of 2016 to date.
- The ability of China’s authorities to manage growth in a country of 1.357 people is truly remarkable. Good news for centralized planners everywhere!
- The official growth is literally incredible as in “not credible”.
I’ve now read three distinct articles from three different source questioning the official Chinese growth rate. Here’s what the editors of the Wall Street Journal have to say:
This year’s data heighten uncertainty as the economy charts its new normal of more modest growth. President Xi Jinping is trying to reform the economy in significant ways—less state-driven heavy industry and public investment, more services and domestic consumption—while also tightening political and information control. His two agendas are obviously in tension. Wednesday’s numbers suggest that Beijing’s data crunchers may feel more incentive to give Mr. Xi good news than to reflect complex economic realities.
As Leland Miller and Derek Scissors write, China’s growth is now sustained by debt-fueled investment and government spending, while exports and private investment are slumping. The political imperative of reporting strong growth reinforces the Communist Party’s tendency to protect large state-owned enterprises, the pillars of the old economic model. Officials would face stronger incentives to tackle reform if they had honest rather than politicized economic data.
Is it more likely that the Chinese authorities would understate China’s growth or overstate it? That’s an actual question. If President Xi has announced that growth will be more moderate, it better darned well be more moderate which could result in the National Bureau of Statistics “smoothing” the results down. Who knows? It might be better to rely on statistics that can be verified externally, e.g. container ship traffic, visible electrical consumption, etc. These suggest that China’s growth may be somewhat lower than the official numbers would have us believe but, again, who knows?
