Official statistics from China have been suspect for some time, but in the wake of COVID-19, more analysts are looking at them with skepticism. The Economist reports:
The national statistics bureau will report third-quarter gdp on October 19th. Analysts expect growth of about 5% compared with a year earlier, a strong recovery from the depths of the coronavirus slowdown, and all the more stunning when much of the world is mired in recession. Yet some believe the official growth data have been too rosy this year, not least because China’s pandemic lockdown in the first quarter was among the world’s most restrictive.
Thankfully, the mysteries are not unfathomable. Research published in recent weeks sheds some light on what is really going on. Doubts about China’s data are not new: it is probably fair to say that few serious economists trust its exact growth figures. Instead, there are two broad camps. One thinks that official data are overly smooth, but that the general picture is not all that misleading, because the government sometimes exaggerates gdp and at other times lowballs it. The second camp sees one-sided manipulation, with China’s boffins consistently inflating the size of the economy. The new research comes from both camps.
Start with the more sceptical of the two, best demonstrated in a note in September by Capital Economics, a consultancy. Julian Evans-Pritchard and Mark Williams, its analysts, argued that Chinese data have looked particularly fishy since 2012. Before that, growth regularly exceeded targets by a wide margin. Since then, reported gdp has been smack in line with targets set early in the year. And statisticians have stopped making big revisions to their initial estimates. It all seems a little too perfect.
Other data look more credible. Whereas real growth (ie, adjusted for inflation) has been improbably smooth, nominal growth has been volatile. Moreover, certain elements of the real-growth calculations appear to have been lifted upwards. For years the construction component of gdp moved in tandem with cement production. But from 2014 until 2018 a big gap opened up as construction raced ahead. In the first quarter of this year, when China was in partial lockdown, the transportation component of gdp was resilient—despite a collapse in freight and passenger traffic.
So Capital Economics has developed a “China activity proxy” to gauge growth. There is a long tradition of analysts using alternative sources to measure the Chinese economy. No less an authority than Li Keqiang, now prime minister, famously did so when he ran a north-eastern province. In their latest proxy Messrs Evans-Pritchard and Williams include eight indicators, from property sales to seaport cargo. The results are stark. Whereas official gdp grew by 48% in cumulative terms from 2014 to 2019, they put the true expansion at 33%.
Read more here.