China Research

This morning, China’s National Bureau of Statistics (NBS) announced that GDP had risen by 6.9 percent in 2017, well in line with the official objective of “6.5 percent or more”. China’s political leader XI Jinping is praised particularly for this result by the statisticians. Having read the document, I would like to add some comments on the new statistical numbers for 2017.

1. Expected result: The China Survey Panel of Linnaeus University (chinaresearch.se) predicted in December a GDP growth for 2017 at roughly 6 ½ percent. My own estimate, however, was somewhat higher, i.e. at 6.8 percent because of the obviously good mood and optimism shown by most of the important political leaders. In my eyes – without further discussing the credibility of Chinese statistics – achieved GDP growth at the upper end of the official objective was very predictable.
2. Services somewhat disappointing: The downsizing of the growth rate for the primary and secondary industry is visible again in the latest annual statistics. However, one must wonder why the production of services rose by just 0.1 percent to 8.2 compared to 8.1 in 2016. One could have expected a somewhat higher increase since the expansion of the service sector has so much political priority.
3. Investment in secondary industry continues to weaken: The development of investments during 2017 pointed in the right direction: slowing down of investments by the secondary industry but good investment growth of the high-tech industry and the tertiary sector. Investment in residential buildings picked up strongly also in 2017 but it seems still unclear where healthy equilibria between supply and demand in the residential housing sector of major cities may be located. Thus, bubble and debt risks still exist also from this angle.
4. Too little information about private consumption: The official accounting of private consumption still shows obvious shortcomings in classification. Double-digit increases of retail sales indicate, however, that private consumption in China should have developed quite well in the recent year. But more detailed information about the composition of private consumption would have been appreciated.
5. Supply-side reforms on track: The Chinese mean – unlike Westerners – by supply-side policy mainly the modernization of production structures and capacity (reducing overcapacity in traditional sectors and achieving visible progress for the innovation-driven enterprises) – and also improvements of the environment. According to the NBS further supply-side progress was noted in 2017. This is positive and should probably not be doubted – and will remain crucial for the future development of China.

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

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