Who was right and who was wrong on China's economy
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The announcement that China's GDP grew by 8.7 percent in 2009 put an end to the question whether China would achieve the 8.0 percent growth target set at the beginning of the year.
The most important discussion regarding the growth target was among Chinese economists and forecasting organisations. However a widespread and intense international debate accompanied it. It is therefore both legitimate and necessary, from the point of view of deciding how much weight to give to analyses in the future, to register clearly who was proved right and who was wrong.
To make a balance sheet of such forecasts is far from a backward looking historical exercise. In most cases there is no firm evidence that those who made wrong projections, and therefore greatly underestimated the strength of China's economy, have corrected the analyses that led to the errors. As the analyses concerned what was in 2009 easily the world's fastest growing economy, these are not minor mistakes but fundamental flaws.
Taking first those who correctly predicted high growth for China, and the success of the stimulus package in achieving this, these included, in addition to the present author, Jim O'Neill, chief economist of Goldman Sachs, Professor Danny Quah of the London School of Economics, Mark Weisbrot of the Centre for Economic and Policy Research, Yan Wang of BCA Research.
Those who made an erroneous analysis included Stephen Roach, chairman of Morgan Stanley Asia, who said last March: "The [Chinese] government's steadfast insistence on hitting its official eight percent GDP growth target for 2009 is simply no longer credible.... it is almost mathematically impossible for China to grow by eight percent growth for the year as a whole. This needs to be recognised and communicated both within and outside of China."
Michael Pettis of Peking University declared that: ''The U.S. would be the first major economy out of the crisis and China one of the last." In fact last year China's economy grew by 8.7 percent while the US economy is likely to have shrunk by 2-3 percent.
Prior to April 23, 2009 Morgan Stanley's prediction for China's 2009 GDP growth was only 5.5 percent. On that date it raised its projection to 7.0 percent – still an underestimate. Goldman Sachs, despite Jim O'Neill's personal positive assessment, initially projected 6.0 percent growth in China, before revising its forecast in April to 8.3 percent. At the start of the year, UBS projected China's growth would be 6.5 percent.
In the first half of 2009, Standard Chartered made a 6.8 percent prediction. In December 2008, Ben Simpfendorfer of the Royal Bank of Scotland projected China's 2009 GDP growth at only 5 percent.
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