China released its economic growth data for the first half of 2015 in mid-July, indicating steady growth. But some greeted the figures with doubt, arguing China’s growth indicators are not reliable. We spoke with an economic expert, who broke down each argument in detail.
7% growth for the first half of the year, that’s the official figure. But the data has come under question by some international agencies and experts.
Capital Economics, and the Conference Board argued the GDP deflator, a measure of price change, was under-reporting inflation, and China’s official growth rate was very likely exaggerated.
China’s GDP deflator under-reporting inflation?
Liu Xueyan, an expert in macroeconomics, says the argument doesn’t hold water.
“The GDP deflator has no direct relationship with the actual GDP growth rate. Under our accounting method, the nominal GDP and the actual GDP are accounted separately. The GDP deflator is achieved after combining the two results. It’s an accounting unit, not a statistical survey unit. It’s not logical to say that a low GDP deflator means a low GDP growth,” liu said.
Some people have also said China’s actual growth should be under 7%, as judged by quantity indicator, like electricity consumption and freight volume.
Liu says the argument fails to factor the changes in China’s economic structure.
“The proportion of China’s tertiary industry was rising, while that of the secondary industry was declining. In this case, if we measure GDP growth by quantity indicator, it would be lower. Even within the secondary industry, adjustments were made. During the first half of the year, the proportion of high-tech industry rose. And energy consumption declined accordingly,” liu said.
Similarly, a questionnaire survey by Bloomberg News said actual growth was below the official 7%.
Can survey questionnaire predict China’s growth rate?
Liu says the conclusion was arbitrary.
“The survey samples are very limited. Some involve only ten or twenty investment managers, and then evaluate their conclusions. This method is based only on personal opinions. It can be very subjective,” liu said.
Expert says the 7% growth rate was attributed to four aspects of economic development.
First is the stabilization of supplies. Both the secondary and tertiary industries maintained a steady growth.
Second, demand remained stable in the first two quarters, with revived growth of investment and exports.
Third, developed regions in the Yangtze River Delta and Pearl River Delta saw increased economic growth.
And fourth, major economic data on jobs and revenues showed a sharp rise, with over seven million new jobs, and higher incomes.
Since the reform and opening up in the late 1970s, China’s economic data has been under international scrutiny. To produce reliable statistics, the country has conducted three national economic censuses, the first of which was held in 2004. China’s statistics authority has also adopted international criteria to better calculate growth indicators.