China Research

Here we go again. China’s GDP-growth has been published for the third quarter only 19 days after the end of September. This is an incredible effort for a country when regarding the enormous size of the Chinese economy (no 2 in the world measured in Purchasing Power Parity, PPP). By the way, the first preliminary results for the corresponding GDP growth rate in the U.S. will be published on October 29.

GDP-growth in China for q3 came in at 6.9 % compared to the same quarter last year. This was exactly what I expected in previous blogs , i.e. 7% plus/minus 0.1. But is this a number we can believe in?

Some weeks ago, the National Bureau of Statistics in Beijing announced that major improvements of Chinese GDP statistics should be started in the calculations for this year’s third quarter. So far, quarterly GDP measurements were derived from cumulated numbers (for example, q1-3 minus q1-2 to come to the third quarter). According to Chinese official statements, this simple method should be replaced by measuring “the economic activity of each quarter”. However, when analyzing the official summary for the third quarter, I still cannot recognize any major change.

Furthermore: What are “scientific growth stimuli” as quoted below? And suddenly supply side economics gives “measurable “GDP-stimulating results? Probably, more time will be needed to single out the real start, content and potential progress of the announced statistical reform.

Sure, the intention is good. But what does this mean to the trustworthiness of Chinese GDP statistics? I still have my doubts. The current – nominally still quite good number for GDP growth in the third quarter – could be achieved according to the NBS by “adopted scientific measures to stabilize economic growth, promote reforms, enhance restructuring, benefit people and control country risks, implemented effective range-based, targeted and discretionary macro regulation, further deepened reform and opening up, encouraged mass entrepreneurship and innovation and increased supply of public goods and services. ..” Somewhat contradictory are the statements that “China was facing (add: in the third quarter) increasing downward pressure of the domestic economic development “ and that “the world economy was weaker than expected” – and stable GDP growth was achieved all the same.

Consequently, China will meet its GDP-growth target of 7% for the whole of 2015 despite the mentioned problems. Who can believe in the 6.9-percent number of today which has been achieved without mentionable carry-over effects?

However, I would be very glad if these doubts gradually could be evaporated. Such a development would be good for China itself – but also for global markets of each kind, Swedish companies and investors in China included. Visible statistical improvements would fit well for a giant country and major global player like China on its way to become the largest economy in the world, as I have been pointing at before in quite a number of papers and articles.

Hubert Fromlet
Senior Professor of International Economics, Linnaeus University
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