Scrutinizing China’s GDP in 2019 – more to be discussed than the pure numbers

10:18 by Hubert Fromlet, Kalmar

Kinas BNP för 2019 under luppen – det handlar om mer än siffror

Sammanfattning / Brief summary in Swedish

Under det sista kvartalet 2019 diskuterade jag vid flera tillfällen den relativt lättgjorda siffermässiga BNP-prognosen för 2019 och den kommande officiella målsättningen för 2020 års BNP-tillväxt (exempelvis i chinaresearch.se från den 18:e och 2:a december samt från den 28:e oktober). Utländska intressenters tillgång på de kinesiska statistiska originalkällorna ter sig fortfarande otillräcklig. Det innebär att den även i år – trots det förestående nyårsfirandet – alltför snabba publiceringen av det kinesiska BNP-utfallet för 2019 ånyo sätter sina frågetecken avseende kvalitet, omfång och noggrannhet.


I had my doubts about the quality of Chinese GDP statistics for quite some years. Major qualitative progress still is not visible – even if some improvement may or should have taken place. One of the problems in such a context is certainly that motivated increasing credibility tends be hard to achieve when such doubts have been existing for many years.

Predictable GDP

Briefly summarized, Chinese GDP results in 2019 looked as follows (which I have been predicting several times during the past quarter in my own blog chinaresearch.se, e.g. on December 18 and 2 and on October 28):
GDP: +6.1 % yoy; GDP Q4 yoy: 6.0 %, Q4/Q3:+1,5 %).

Obviously, the Chinese remain being interested – as previously considered – in keeping “the six” in front of the decimal point. This is also – most probably – why the official GDP-growth objective for 2020 is set at “around 6 percent” as foreseen here a couples of weeks ago.

Such a goal for GDP growth seems to be ambitious but also prestigious to achieve – “prestigious” particularly since 2021 is such an important year for China’s political leaders. Therefore, I cannot imagine an official GDP growth (very slightly) below 6 % during 2020 for more than maybe one quarter or so. If necessary, the GDP-growth curve probably “has to be reversed” to the better during 2020 ahead of the 100th anniversary day of the Communist Party in 2021 and the start of the new five-year plan – the 14th – the same year.

Ten GDP issues to discuss further after the national-account publication

International analysis after GDP publication on January 17 this year by the National Bureau of Statistics (NBS) turned out to remain mainly on the surface. Below, ten points with an obvious need of more discussion and more profound analysis are given – unless I have overlooked encouraging developments more recently.

  1. Still lagging transparency.
    The summary of the national account for 2019 is written in the old style of planned economies with many numbers. The structure of the report makes the whole information difficult and monotonous to read. The lagging transparency may be at the expense of understanding and quality of analysis.
  2. Still insufficient modernization of national accounts.
    Already in previous years, I criticized that too much focus is put on the production side of national accounting which should be considered as a serious shortcoming. Also this time, I cannot find changes of GDP aggregates such as private consumption and net exports in real terms.
  3. Still too even numerical developments between quarters and years.
    Almost even GDP numbers from quarter to quarter (2019 quarter on quarter, q1-q4: 1.4, 1.6, 1.4 and 1.5%) and the high predictability of annual GDP changes remain strange. So does the very early publication on January 17, also when considering the Chinese New Year celebrations.
  4. Official growth objectives are regularly met.
    In my view, this phenomenon is strange as well (happened again in 2019, “6 to 6 ½%” – the outcome: 6.1%, despite structural domestic growth problems and international impediments from the trade war and the general downturn of the global economy). 6.1% may reflect a somewhat negative bias.
  5. How can statistical improvements be discovered?
    As has been singled out above, it is hard to find statistical improvements between the years. More frequent information – if available – would be useful in this respect.
  6. Where is a deeper analysis of structural achievements in the past year?
    Sure, some hints can be found, for example the officially high number of 236 million floating people of a population that in 2019 just exceeded 1.4 billion. I also like all the summing up of remaining problems that are mentioned in the comments on the national account for 2019 close to the end of the summary. However, what I still miss all the same is the continuous, regular and also systematic reporting on the development of these structural problems, maybe at other occasions. Certainly, one can never be sure having read everything about this topic – but this kind of difficulty is also an institutional shortcoming.
  7. Still missing: a deeper discussion on future-oriented production.
    Normally, such a discussion is not part of ordinary national accounting. But the Chinese publish the growth rates for agriculture (2019:+3.1 %), industry (2019:+5.7 % but considerably more for high-tech manufacturing) and services (2019:+ 6.9 %). At least, this segment is partly taken up by Chinese authorities which may be helpful to some extent. We also learn that that the value added of the service sector now even exceeds the aggregated value of both industry and agriculture. It would be wonderful to learn even more about these developments – without setting expectations too high that this will be the case.
  8. “Maintaining stability”has been achieved – what do we know about this?
    There is a lot of laudation in the introduction of the recent annual GDP report, including that stability has been maintained. What do we really know about this – and what does it really tell us? Anyway, also such an information does not really belong to national accounting. But having said “a”,…
  9. More to look at: statistics on urbanization.
    Urbanization in China continues to increase. This note is part of the comments on the national accounting for 2019. The official number of urbanization is now 60.6 percent of the total population. Without having tools to check these population numbers, it may be worth-while looking regularly at the population statistics. Urbanization will be – or should be – a future main driver of private consumption.
  10. For neutral observers: How much skills and/or herd mentality can be found when it comes to expectations and interpretation of specific economic statistics, for example on GDP?
    This is certainly not a topic for China’s public administration but it would be interesting to know more about China analysts’ independence or the presence (absence) of exaggerated psychological herd mentality when it comes to (statistical) forecasts or analysis. When regarding the qualitative shortcomings of Chinese statistics, non-government or private conclusions on the Chinese economy usually seem to be too uniform – running to strongly in the same direction.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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