The Economist - USA (2020-10-17)

TheEconomistOctober 17th 2020 59

1

N

o sophisticated analysisis needed

to show that China is in better eco-

nomic shape than most other countries

these days. Just look at its bustling shop-

ping malls, its jammed roads in rush hour

and its mobbed tourist sites during holi-

days. But if the crowd scenes suffice to af-

firm that China is doing well, a little more

work is needed to address the question: ex-

actly how well? As is often the case with

Chinese data, the answer is controversial.

The national statistics bureau will re-

port third-quarter gdpon October 19th. An-

alysts 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 un-

fathomable. 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 seri-

ous economists trust its exact growth fig-

ures. 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 govern-

ment sometimes exaggerates gdpand 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. Ju-

lian 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 gdphas

been smack in line with targets set early in

the year. And statisticians have stopped

making big revisions to their initial esti-

mates. 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 ele-

ments of the real-growth calculations ap-

pear to have been lifted upwards. For years

the construction component of gdpmoved

in tandem with cement production. But

from 2014 until 2018 a big gap opened up as

construction raced ahead. In the first quar-

ter of this year, when China was in partial

lockdown, the transportation component

of gdpwas 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 Ke-

qiang, now prime minister, famously did

so when he ran a north-eastern province.

In their latest proxy Messrs Evans-Pritch-

ard and Williams include eight indicators,

China’s economy

The real deal

SHANGHAI

China’s reported growth has long been far too smooth. Can figures showing a

strong rebound be trusted?

The lines of others

China, GDP, % change on a year earlier

Sources:NationalBureauofStatistics;CapitalEconomics;

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