China Research

Today, the two stock exchanges in China were closed again after having dropped by 7 percent. As I have been emphasizing many times on this page, developments like this should not be surprising at all. Finally, China has to pay for all the shortcomings in transparency and statistical quality. Markets cannot know how serious and sustained the Chinese growth problems really are.
Consequently, confidence in reasonable growth prospects is shrinking. Right or wrong, current behavior of financial markets is logical. For this reason, China should do everything to restore this lost confidence. Improvements take, of course, time. But certain steps can be taken any time soon.
For instance, by calculating and revising GDP numbers closer to reality. In other words, by getting to something else than a 6.9, 7.0 or 7.1 percent in GDP growth for the fourth quarter of 2015 and by allowing for more fluctuations and revisions between the quarters. Not to forget: it really should take more time to make the quarterly GDP calculations applicable than it is still the case.
I’m sure, the whole world will look very carefully at the GDP results for 2015 which probably will be presented already three weeks from now. No other country has such speedy statistical calculation process of GDP as China shows year after year. Or will there be a change already this time?

Hubert Fromlet
Senior Professor of International Economics, Linnaeus University
Editorial board

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