In an unusual essay (in Chinese here), Guo Tongxin, an official at the National Bureau of Statistics, gives estimates for recent changes in China’s gross domestic product that follow the international convention of quarter-on-quarter comparisons. That’s a technical-but-important departure from China’s usual practice of describing year-on-year growth – and the figures paint a very different view of China’s economy over the last year or so than the headline numbers China has previously announced. (The article, published Thursday, carries a disclaimer saying it represents Guo’s personal views, not those of the bureau.)
China’s traditional method compares GDP – and most other indicators – to the same period in the previous year. The U.S. and most other developed economies report GDP’s changes relative to the previous quarter, which gives a clearer picture of the most recent trend. But with the onset of the financial crisis, China’s statistics bureau has been working to improve the transparency and quality of its data. Among other changes, it has promised to start regularly publishing quarterly GDP growth rates in 2010. Many private-sector economists already try to make such estimates, but complain they lack sufficient information to do so accurately.
The new estimates from Guo, which only cover 2008 and early 2009, may be a surprise for skeptics who suspect that China’s statistics officials are only capable of reporting nice-sounding numbers. These figures actually show the slowdown in the fourth quarter of last year was even sharper than most outside economists had believed.
Economists surveyed by the Journal in February had, on average, estimated that fourth-quarter GDP expanded at an annualized rate of 2.1%. Guo cited what he called a preliminary estimate that fourth quarter GDP grew 0.1% from the previous quarter, equivalent to an annualized rate of just 0.4%.
The headline year-on-year growth rate announced at the time, by comparison, was 6.8% — a gap that clearly shows how quarterly and annual growth rates can give very different pictures of economic turning points.
In a recent article, noted China economist Albert Keidel said the preference for year-on-year comparisons “illustrates the choice made by China’s statistical authorities to use measures that are relatively stable and change only gradually.” The year-on-year comparisons are not necessarily less accurate – the U.S. and other nations also report them – but their use does mean Chinese authorities “give up measures that present a more timely picture of what happened to the economy in the immediately preceding quarter or month,” Keidel wrote. That preference has come to seem much less desirable given the rapid changes in the economy over the past year, and has led to pressure on the statistics bureau to improve.
For the first quarter of 2009, when outside economists generally agreed with the bureau’s assessment that growth had picked up significantly, the difference isn’t so great. Guo’s preliminary estimate of a 1.5% quarterly expansion, equivalent to 6.1% annualized rate, is within the 5% to 7% range that most private economists came up with at the time. Guo also said growth for the second quarter is likely to accelerate further to above 2.0%, equivalent to an annualized increase of more than 8%.
Still, it’s notable that the bureau only disclosed the low estimate for fourth-quarter growth several months after the fact, when the government is more confident the economy is recovering. It’s not alone — the World Bank and several investment-bank economists have recently raised their forecast for China’s growth this year, citing the bigger-than-expected effect of the government’s stimulus programs. But it’s hard to escape the feeling that the statistics bureau is still sensitive to the political implications the numbers it publishes.
–Andrew Batson
