An article entitled Is the 3rd Quarter Economic Growth Rate Credible? on the National Bureau of Statistics' website seems unlikely to set the tone for a hot debate on China's economic growth rate. The Dow Jones Newswires subsequently released an article saying the NBS's article would, instead of dispelling doubts, likely arouse a new debate about estimating China's GDP growth.
New doubts, different voices
"There have been various views about China's GDP growth every time the National Bureau of Statistics releases an official figure. But contrary to voices of precedence, more economists have the view that this year's figure was under valued. Among them, most are foreign scholars as well as some domestic scholars," Professor Ren Ruoen from the School of Economic and Management Science of Beijing University of Aeronautic and Astronautic Science and Technology told China Economic Times. Ren has argued with the American scholar Thomas Ｇ．Rawski about the reliability of China's economic growth rate.
Qiu Xiaohua, vice director of the National Bureau of Statistics announced at a press conference in late October that China's GDP in the first nine months of this year grew by 8.5 percent from the same period last year.
But contrary to some foreign scholars' estimates that China over valued GDP growth over the previous two years, many Chinese and foreign economists suggest that it may be "several percentages less" than the actual growth figure this time.
Union Bank of Switzerland, Hong Kong shares these doubts with many others. Jonathan Anderson, chief Asia Affairs Economist of UBS, Hong Kong, said: "China's economic growth rate is enjoying an ever faster momentum." The GDP growth rate in the 3rd quarter should be 14.2 percent, according to Swedish Bank's internal computing system, which is much higher than the NBS's 9.1 percent growth rate. Jonathan Anderson also predicted that China's 2003 GDP growth rate may be around 11 percent, which is also obviously higher than Qiu's "8.5 percent annual economic growth rate" estimate.
The Financial Times said that Jonathan's view was echoed by such Chinese economists as Wu Jinglian. Wu was quoted as saying at a recent seminar that China's GDP growth in the first half of 2003 was over 10 percent and he expected annual economic growth may beat the government's estimate.
Chang Xiuze, a researcher with the Economic Research Institute under the State Development and Reform Commission, said he had investigated Zhejiang, Jiangsu, Shandong, Guangdong provinces and Xinjiang Autonomous Region after the SARS period. According to growth figures reported by local governments, he felt that the growth rate in the first three quarters would be above 10 percent.
"This judgment is based on energy consumption, transportation and logistics indexes as reported by local governments," Chang said. "Certainly, the NBS will proceed with these indexes on the basis of its experience, sample investigation results and other scientific methodology to work out the correct figure."
Arguments from foreign and domestic economists attracted the NBS's attention. The Department of National Accounting from the NBS said: "Though the (under-valued growth rate) view is held only by a small number of people, its influence is substantial. While the public is quarreling on whether the economy is overheated, the reliability and precision of the government's GDP growth rate figure directly affects correct comprehension of the current macro economic situation and the macro economic policy-making for 2004."
Under the RMB appreciation pressure?
From the "China Fall" theory to the "China Threat" theory, it seems China's development has to go along with all kinds of impeachments. In 2003, the accusation made towards China's economy mainly concentrates on the renminbi appreciation issue. Some US interest groups even claim that China's fast export growth is at the expense of US jobs.
"Their claim about China's under reported economic growth is linked with the reminbi appreciation pressure," said Prof Zhou Tianyong, vice director of the Research Institute of the Central Party School. "According to their logic, since China underreports its GDP growth, it means China underreports its export competition and undervalues the renminbi currency. So the renminbi should appreciate."
Morgan Stanley's chief economist Stephen S. Roach's remarks at the US-China Economic and Security Review Commission may help to see the real point: In a global slowdown, market share becomes a very rare product. Any threat to competitive position plus the gap between labor population and employment posts can trigger fully hostile reactions.
Today, pressure is everywhere. China's huge trade surplus over the US in recent years is widely seen as a major source for growing tension in the relationship. In their view, the culprit is China's fixed rate currency policy. Adjustment for the renminbi exchange rate is considered a necessary in their mind.
But Professor Ren Ruoen doesn't quite agree with this view. He holds that, "The doubts about China's growth rate are not supposed to be connected with a "China Threat" theory and the renminbi appreciation issue."
Prof Ren said that those babbling about the "China Threat" theory are mostly affected by strong political influence. Those concerns about China's growth rate are mostly independent business individuals or commercial institutes with stronger economic expert backgrounds. As businessmen, they care more about how to make more profit in China than hoping for Chinese debacle or some strong political issue. So, they will make fewer remarks about the renminbi appreciation issue since they do not like to see frequent changes in the renminbi exchange rate. Otherwise, they will be exposed to more risks.
In the view of some foreign media claiming that the NBS is considering to revise the GDP for political reasons, Ren feels it's just a kind of "over-focus for business interests".
Is statistical system reliable?
"China has such a vast territory and a huge number of economic entities. Even the NBS deploys several hundred professionals to figure out the country's economic growth rate, the final result is still bound to contain some marginal errors. And most economists are not as familiar as they are with the statistical growth system," said Pro Ren. Therefore, some economists' judgments are based on personal feelings that "shouldn't be given too much serious consideration."
There are generally three methodologies used to account GDP, namely output-based GDP, income-based GDP and expenditure-GDP methodology. China has been using the output-based GDP methodology. UBS's lower GDP is surely an outcome from the expenditure-based methodology, according to Ren.
Prof Zhou Tianyong said, "The 'under-valued GDP' economists bear in mind the fast growth in energy consumption, investment and exports fields but may ignore for some reasons weak domestic demand and lowered labor participation rates of urban population."
"China's economic growth is very sophisticated. No one can make a proper judgment according to partial aspects of the whole economy," said Zhou Tianyong.
"The marginal errors in economic growth estimates cannot be avoided completely. Even in the US, the Federal Reserve has to keep reviewing and revising US economic growth," said Ren Ruoen.
According to the Department of National Accounting, the GDP reckoning is a substantially sophisticated procedure from a giant operating system. The monthly and annual GDP information releasing system, according to international common practice, is not simply a one-stop procedure but has to be revised according to basic figures collected gradually. For example, the US twice revised its first quarter growth rate from 1.6 percent to 1.9 percent then finally set it at 1.4 percent. The NBS will reform traditional practice by establishing a regular readjustment system on a time-line with the collection, review and releasing of economic information. The figures about the first three quarters will also be further reviewed and adjusted.
(China.org.cn Alex Xu and Daragh Moller, November 28, 2003)
