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March 10, 2012

China Official Actual GDP Growth Compared to Targets

Sources: Central People's Government of the People's Republic of China, IMF; as of 03/05/2012. IMF estimated growth rates are based on constant 1990 prices in Chinese yuan

Fisher Investments writing at theStreet.

Historically, China's official growth target has been the lower bound of a range -- an easily attainable threshold they can boast of beating at year-end (under promise, over deliver, as the saw goes).

Real Chinese GDP growth has handily trounced the target every year since 2000 (the earliest official data available), nearly doubling it in 2007. In 2004, the last time China forecast 7.5% growth, GDP grew a robust 10.1%. That's not to say 2012 will match that pace, but growth on par with recent years seems plausible.




2012 is a Chinese "election" year -- citizens elect new local leaders (China having a one-party system, they choose between communists and communists), and the party elite select the new president and premier. Planned transitions have the potential to sow dissent --the party factions passed over for promotion could launch a power struggle, and civil unrest could erupt.

Careful economic management can mitigate these risks, though. If growth is robust and inflation under control, citizens are likely to be a lot more content, top to bottom. Also, despite 35-plus years of liberalization, China's is a command economy, so officials can use available throttles to manipulate the economy fairly well to suit their aims. Last year they reined in inflation (which required allowing growth to slow), likely setting the stage for a planned acceleration during the transition -- matching what China's done during prior power transitions.

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