The Curious Case of China’s GDP Figures

Discussion in 'China' started by Daredevil, Mar 7, 2013.

  1. Daredevil

    Daredevil On Vacation! Administrator

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    Early this year, China found a missing province, one doing very well for itself. The total GDP for 2012, according to the National Bureau of Statistics, was 51.9 trillion yuan. The total GDP figures of China’s 31 provinces for 2012 added up to 57.6 trillion yuan, giving the phantom 32nd province an annual GDP of 5.7 trillion yuan. For many economists, this was just a shining example of what they have believed for years: that China’s GDP numbers are questionable at best, and often exaggerate China’s growth, largely for political reasons.

    In fact, in 2007, Li Keqiang, then-party secretary of Liaoning and now soon-to-be premier, said that GDP statistics were “for reference only” and “man-made,” and that for his purposes, he preferred to look at electricity consumption, rail cargo volume, and loan disbursements. He did not say this publically–rather, his statements (reflecting what many officials surely believe) came to light in 2010 in a U.S. government cable released by Wikileaks. :rofl:

    There are a number of reasons for doubts about the accuracy of China’s GDP. To begin, there are structural political disincentives to reporting accurate GDP figures at the local level. Local officials are promoted almost entirely on the basis of their locality’s growth rates, giving them a huge incentive to report increasing GDP figures, no matter if they are or not. Environmental concerns have also created an incentive for officials to lie: higher growth rates, when paired with the amount of coal burned, give the province an appearance of greater energy efficiency.

    At the central level, it is politically imperative that GDP continues to rise, primarily because the central government has erected a system on the promise of economic success, and fears instability should growth decline and unemployment rise. At this point in time, with a leadership transition in process, it is particularly crucial that growth continue.

    There are also questions about the mechanics of compiling and calculating the GDP figures, including how much inflation is accounted for. The Wall Street Journal recently quoted Standard Chartered economist Stephen Green as saying that he believes that China’s 2012 GDP was closer to 5.5%, as opposed to the official figure of 7.8%. He uses a different measure of service sector inflation, which is higher than the official deflator (the figure that subtracts inflation from growth to come up with GDP).

    Economists also doubt China’s GDP numbers because they seem to be compiled unnaturally fast: the NBS takes 2 weeks to collect its data, compared to 6 weeks for the much, much smaller Hong Kong, and 8 weeks for the United States. This year, 2012 GDP figures were published on January 18th.

    Finally, economists are concerned about the sampling methods of the NBS: the South China Morning Post reports that officials still “rely heavily on an old-fashioned input-output model of industrial value-added derived from the era of soviet-style central planning” that is able to measure government investment, but not other sectors, such as household spending.

    With these concerns in mind, what steps can we and the central government take to more accurately gauge China’s growth?

    Several years ago, analysts looked to electricity production to more accurately gauge growth figures. However, last year the New York Times reported that power company managers have been ordered by government officials to report false numbers, exaggerating power production. The article was questioned, but reports by South China Morning Post reinforce the notion that we can no longer rely on this secondary information to provide insight into GDP figures, chiefly because of aluminum smelters. The article, published in July 2012, notes that local governments have built countless aluminum smelters (taking production of aluminum from 3 million tons in 2000 to 19 million in 2011) that require a huge amount of electricity–5 percent of China’s total in 2011. Aluminum is now in surplus, but has fulfilled local governments’ goal of inflating their electricity use figures.

    On the part of the central government, the government can begin by changing the perverse incentives at lower levels to promote more accurate numbers from the beginning. As noted above, local officials, eager for promotions that are predominantly based on growth figures, are prone to exaggerate their accounts.

    Businessweek notes that the central government has taken some steps to correct the problem: more data is coming directly to the center, without a layover at local party offices; the NBS is working to standardize data collection across ministries and industrial associations; and the NBS is collaborating with such organization as the UN and the IMF to improve economic monitoring. The numbers could also benefit from increased transparency about the methodology and process of collection.

    This discussion of China’s GDP figures should not be read as entirely a blame game: indeed, there are a number of existing challenges that would make it very difficult for even the most transparent and efficient system to produce accurate numbers. Most significantly, China’s service sector is growing rapidly, requiring a very different method of measurement than China has used in the past and making growth accounting inherently more difficult.

    In light of the challenges of assessing China’s true GDP, there have also been discussions about abandoning the fixation on the GDP figure altogether, and moving toward other, alternate figures, including a happiness index, or green GDP, which accounts for environmental degradation.

    The real answer here is to not rely on the figure of China’s GDP as the end all, be all. With the structural issues present, primarily a changing economic structure, it is instead imperative that one looks at a range of economic indicators, including, but not limited to, new car sales, home construction, fixed asset investment, and freight volume. It is also crucial to understand the political underpinnings of the accounting for and reporting of China’s GDP.

    The Curious Case of China’s GDP Figures
     
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  3. no smoking

    no smoking Senior Member Senior Member

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    Does anyone have the evidence for that!?
    Because I just can't believe any leader in any country would say that in front of any foreigner!
     
  4. badguy2000

    badguy2000 Respected Member Senior Member

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    oh,boy, the topic has been discussed hundreds of times in CHina in the past decade......and you guys now talk about it as excitedly if you were finding a new continent......


    here are the explaination for the case ,after hunderds of discussion about it in CHina:

    1. repeated caculation of GDP caused trans-provincial deals and commerical activities

    2. Chinese center government has its own statistic teams,which is independent on local governments....
    So, GDP figure published Beijing is not based on that published by local government at all

    3. GDP figure published by provincial government is more reliabel than that published by Chinese center government...because Beijing doesn't want a too large GDP,which might increase CHina's duty and obligations in WTO and other cases.
     
  5. badguy2000

    badguy2000 Respected Member Senior Member

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    beside, China's nominal GDP is only 50% of USA's....

    however, last years, CHinese bought bought 2 times more cars ,7 times of steel,2 times of PC ,2 times of TV sets and other household appliances,2 times of food,7 times of porks,3 times of fruits than Yankees,

    In fact, CHinese bought more every items than USA.....however China's nominal GDP is still only 50% of USA....


    so, with your own brain, whose GDP are fishing fake figure,USA or CHina??
     
  6. badguy2000

    badguy2000 Respected Member Senior Member

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    Sir, China reports its GDP as India's 4 times. It seems that you really insist on Mr. Li Keqiang's favorite measures of electricity consumption or rail freight transport. If these measures are used instead, I think China will turn out to be at least 6 times of India
     
  7. Daredevil

    Daredevil On Vacation! Administrator

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    You have certainly not read complete article. See what they say about Electicity consumption figures

    So, even there we have to face Shanghai statistics.:rofl:

    Also, this is another indication of fudging up GDP statistics

    Not everything adds up. When things don't add up then its not a math anymore its voodoo statistics.
     
  8. shiphone

    shiphone Senior Member Senior Member

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    please ... Electric power consumption (kWh) | Data | Table

    a smiple example:


    2008-2012 Electric power consumption (kWh)

    China 3,937,923,000,000
    India 754,612,000,000

    and the GDP figure

    China 2012 8,226883 Trillion USD
    India 2012(Jan-Dec) 1,816186 Trillion USD
     
    Last edited: Mar 8, 2013
  9. shiphone

    shiphone Senior Member Senior Member

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    Such an alarmist attitude is really not necessary...we are talking about this problem for years, this problem existed since 1985 ,but it seems ' obviously Growing' in recent years...no one covering it and the solution of the center goverment is on the way .

    and remember, as someone said:

    ---------------------------------------
    every year ,we got such news ...here's the latest one from another National News Agency: ECNS.cn

     
    Last edited: Mar 8, 2013
  10. Srinivas_K

    Srinivas_K Senior Member Senior Member

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    It is always hard to maintain the same rate of growth of rate when the economy is increasing and becoming huge. I wonder how CCP comes up with growth rates just more than India every time :rolleyes:
     
  11. shiphone

    shiphone Senior Member Senior Member

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    obviously it's india's problem ,not China.. it was 'Indian Media' or officers ,or politicians were keep claiming ' India will surpass China in the following years' ,I don't think it's hard to find these brave words on the internet ,and as a Indian news Watcher for 10 years ,I could assure you I could give enough links...I don't think China was going to faking the figure to make the Indian like a 'Big Talker'. ..no sense at all.

    about 3 years ago, indian Plan Commission announced and set a goal for ' double-digit GDP growth' in the following decade and at the same time China National Development and Reform Commission (similar to your Plan Commission) kept told the Chinese people the High Speed Growing might end soon,we should get used to the lower speed at around 8% in the following years, and 6 % in the future...
    --------------------------------
    the good example is:
    Last March , our Government set the GDP Grwoing Rate of 2012 : 7.5%(source) .... and China achieved 7.8 % in the end...
    one the other hand ,at the same time Indian Gov also set a goal of 2012-2013 : 7.6% (you could have a look at the news at the same period of last year ).... the final figure would be ?.....might be around 5%

    you see ,india had the chance to achieve the great ambition right in this year(at least in the planning)...what a pity... our new government kept setting the goal of 2013 : 7.5% , 4 days ago. india could try this year.

    I happened to read this news this morning. ...and I think comment section of this news is more interesting...
     
    Last edited: Mar 8, 2013
  12. Ray

    Ray The Chairman Defence Professionals Moderator

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    This is an unique statement.

    It means everyone is independent of each other and each one is a Khalifa!

    How does China plan? Is their planning not based on some sort of figures that is common to the local and the Central authorities?

    Local Govts have their own plans, independent of the Beijing coterie?
     
  13. ersakthivel

    ersakthivel Senior Member Senior Member

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    before the Lehmen brothers went bankrupt all stats of American economy did look solid and all of a sudden everything went into a tizzy.So nothing is for sure in economics.
    Who would have thought after the stock market crash , Hero Honda will have more market capitalization than General motors and Citi bank will have lower net worth than State bank of India.
    Since most of the chinese mega corporations are chinese government owned taking loans from most of the chinese state owned banks with opaque balance sheets which are beyond the scrutiny of any analyst who knows what is the real situation?

    Spanking new buildings of Shanghai won't reveal anything ,since the skyline of Manhattan looked ever more impressive in the times before American economy went bust.

    The American companies adopted stringent accounting standards , but nothing could prevent the bubble bursting. What are the accounting standards maintained by chinese state owned banks and firms is only known to communist party bosses.

    I too came across some interesting news about top chinese entrepreneurs leaving china.It is even more interesting.

    http://globalvoicesonline.org/2012/12/07/why-are-rich-chinese-entrepreneurs-leaving-china/
    http://www.nytimes.com/2012/11/01/w...ssionals-leave-china.html?pagewanted=all&_r=0

    If you browse the net you can always find any news you want about any country and paint it in the way you like it.No big deal.

    All corruption cases of India come to light because of free press and judiciary.
    Do you know the supreme court intervened and annulled all the bribe tainted 2G telecom licenses?,
    look at the latest Augusta Westland chopper deal being cancelled.

    Since anyone can come to power in India after elections pushing mega scams below the carpet is not easy in India.
    A 32 year old female reporter (Shalini Singh of calcutta based Pioneer , if my memory serves right) exposed the 2G scam first and saved the country billions and billions of dollar by grit.

    Who knows how independent the chinese press and Judiciary are. Considering indian free media standards chinese news media is simply at PAID NEWS level.
     
    Last edited: Mar 8, 2013
  14. GromHellscream

    GromHellscream Regular Member

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    The amount of GDP is becoming less meaningful towards nowadays China.

    If someone insist on asking how much it truly is, the most possible answer is CCP is hiding a large part of them behind public.

    Exactly following the strategy of pretending weak and buying our time, China comes to the point that it's too big to be hidden from others' sight.
     
  15. SilentKiller

    SilentKiller Regular Member

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    Can u prove these numbers?
     
  16. shiphone

    shiphone Senior Member Senior Member

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    OK ,I'm trying to do it for him...

    not entirely accurate...the fact is: in year 2012
    Cars: 1,549,520,000 VS 735,960,000...but Amaricans bought 708,020,000 Pick-ups for home use as well
    so we should say it is: 1,549,520,000 vs 1,443,980,000

    source: china..USA

    [​IMG]

    souce: MINISTRY OF COMMERCE
    in year 2009 ,the figure is :
    PC :720 Million vs 660 Millions
    Household appliance: 185 Millions vs 137 Millons

    I think this is unfair...we eat porks ,and Westerner got used to eat beef. and our population is 4 times of USA
     
    Last edited: Mar 8, 2013
  17. LalTopi

    LalTopi Regular Member

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    China GDP Really growing only at 2.5% pa

    Interesting that earlier Chinese posters had mentioned the accuracy of using electricity consumption to measure GDP.
    This implies China GDP growth of 2.5% pa

    Why China's Economy May Be Heading for a Crash - Yahoo! Finance

    Also Video commentary:
    Is China's Economy Losing Momentum? - CNBC
     
    Last edited: Jul 1, 2013
  18. rockdog

    rockdog Regular Member

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    Maybe China's GDP Data Isn't Fake After All

    Maybe China's GDP Data Isn't Fake After All - Naomi Rovnick - The Atlantic

    -------------------------------

    Some Indian friends are really pathetic. 8 years ago when China's GDP by World Bank data showed twice than India they said it's fake, now it plus Hong Kong almost 4.5 times they still deny it...
     
  19. rockdog

    rockdog Regular Member

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    double post
     
    Last edited: Jul 3, 2013

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