| Jan 27th 2005 | BEIJING
From The Economist print edition
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No sign of a landing
China's economy continues to grow at breakneck speed
“OFFICIALS produce statistics; statistics produce officials,” goes a neat Chinese saying, referring to the propensity of China's cadres to use falsified data to seek promotion. This week, the National Bureau of Statistics (NBS) declared that China's economy grew by 9.5% last year, its fastest clip in eight years. A few years ago, people might have suspected that this figure was deliberately inflated. The reality, though, is almost certainly the opposite. While officials still love to manipulate figures, it is likely that the government's estimate of GDP growth is an honestly produced one and that its campaign to prevent the economy from overheating still has a long way to go.
Even economists in the government's own think-tanks had been predicting recently that GDP growth last year would be the same or slightly less than the 9.3% recorded in 2003 (albeit still far faster than the 7% target proposed by the prime minister, Wen Jiabao, in March). Last October, a senior government economist forecast that growth in the fourth quarter would be around 8.6%. In fact, according to the NBS, it was 9.5%, a significant upturn from the third quarter's 9.1%. The bureau put a brave face on the figures, attributing the quickened pace of growth at the end of last year to stronger than expected performances in agriculture and services—the parts of the economy China still wants to boost. The NBS's director, Li Deshui, said the growth of investment in fixed assets, such as factories, equipment, property and infrastructure, had “clearly come under control”. Such investment grew by 25.8%, 1.9 points below 2003. And its rate of growth did indeed slow markedly during 2004 from a roaring 53% in the first two months. But December's rate was still 21.3%. Encouragingly, the government's cooling measures, including lending curbs and an interest-rate increase, do not appear to have affected consumer spending. Growth of retail sales of consumer goods remained strong during the year, with December's sales 14.5% higher than a year earlier. This offers some hope that investment can be curbed without a sharp slowdown. But many economists expect the government to have to make further interest-rate adjustments in the coming year, particularly if rising raw-material prices revive concerns about inflation (the consumer-price index rose 3.9% in 2004, up from 1.2% in the previous year, but with signs of easing towards the year's end). The government's GDP figures, however, are not set in stone. Gone are the days when China would announce a GDP growth rate at the end of the year and never look back on it. Since 2003, it has been changing its GDP reporting methods to conform more to international standards. The 9.3% growth rate for 2003, announced last October, was a revision of an initial estimate of 9.1% given the previous January. From this year, provincial GDP figures, which until now have been unilaterally declared by the provinces themselves and have often shown signs of official manipulation, will be verified and announced by the NBS. The GDP figure for 2004 could require significant adjustment following China's first economic census, which was launched this month and is intended to become a five-yearly exercise. China has conducted censuses before of certain parts of its economy. But this one covers all economic activity, except for agriculture. Most important, this census is the first to cover the booming construction industry, and the first since 1993 of the services sector. Both construction and services have grown enormously in recent years and have become big engines of employment growth. In 1995, in light of findings from the first service-sector census, China (in a break from tradition) revised its GDP growth figure for the previous year from 11.8% to 12.6%. According to the latest NBS figures, service industries last year accounted for nearly 32% of GDP, only about the same as ten years ago. In November, 21st Century Business Herald, a state-owned newspaper, quoted an unnamed NBS official as saying that this figure was “clearly lower than reality”. Li Qiang, the NBS's chief statistician, says the census could also show that output by individually- or family-run firms has been understated, with many of them escaping other forms of data collection because they are not officially registered (the census is supposed to cover all businesses, whether registered or not). Mr Li predicts that by the time the forms are collected at the end of March, some 90% of Chinese businesses will have responded to the census—a rate higher, he says, than is found in America. But how accurate will the data be? Although streets are festooned with billboards and red banners calling on citizens to comply with the census, Mr Li admits that some businesses, particularly smaller ones, are unwilling to reveal data for fear they might be leaked to the tax authorities (regulations supposedly prohibit the NBS from doing this). During trial runs last year, cases emerged of local officials tampering with data. In one district, census figures were altered to make them match local records after it was found that output from large industrial enterprises was 90% higher than these records had shown. The first results from the census are due in August, and complete data by the middle of next year. Whatever they reveal, it is unlikely to be that China has been wildly overstating its GDP growth figures, as some economists believe it did in the late 1990s in the wake of the Asian financial crisis. But neither is it likely that they will dispel perennial doubts about what is really going on in China's economy. |