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December 13, 2010

China GDP numbers and Wikileaks

Many internet pundits pounced on the latest WikiLeaks allegation that China's GDP figures were "man-made." and Jim Trippon at Seekingalpha sets China's GDP record straight.

* The source of the wikileak quote was none other than vice premier Li Keqiang, the very man slated to become China's next premier, after Wen Jiabao steps down
* Li's comments referred only to provincial GDP figures.
* Every year, China's provinces publish their local growth figures, and the end result is a mathematical impossibility. Last year all but two provinces exceeded the national growth rate.
* provincial GDP figure are discarded when China's national GDP performance is measured



Beijing does make mistakes with its GDP figures every year. It underestimates the number almost every time.

China's vast, entrepreneurial service economy is hard to track. So two years after official GDP figures have been issued, service economy figures are often added on. The corrected GDP figure is usually in the vicinity of $200 billion higher than previously thought

As the Communist Party secretary for the northeastern province he often received inflated growth reports from party members who were eager to fill a quota or please their superiors. Li, to his credit, ignored the inflated numbers and relied on hard-to-fake indicators.

According to the leaked cable, Li used three metrics for a realistic view of growth:

1. Electricity consumption (which was up 10 percent in Liaoning in 2006)
2. Volume of rail cargo, which is accurate because fees are charged per unit of weight
3. Loans disbursed, which is accurate because interest fees are precise

some hard numerical indicators like those that Li relied on for better provincial statistics?

* China's passenger-car deliveries to dealers rose to a record in November. Sales of passenger cars including multipurpose and sport- utility vehicles increased 29.3 percent to 1.34 million in the month
* China has long since surpassed the U.S in vehicle production with as many as 18 million units expected this year
* China represents more than 100 percent of incremental demand for all six of the most important metals: steel, iron ore, aluminum, copper, zinc and nickel
* China also uses 10 percent of the world's oil and generates 18 percent of the electricity, analysts at HSBC report
* HSBC says China's cement production will grow by 10.4 percent in 2011




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