The latest batch of dubious economy statistics from China

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China’s latest GDP growth figure is in and everyone is surprised. Despite indications to the contrary China’s GDP grew by 7% in the second quarter of this year. Hallelujah!

This marks the second quarter in a row where GDP growth was exactly 7%. How delightfully precise and on target.

Not that there is any evidence that these statistics are fake.

China’s official statistics also show that electricity generation grew by only 0.6% in the first half of this year. Electricity generation data is viewed as being reliable. There is no evidence, that I’m aware of, showing it might be fake. So when GDP grows by 7% and electricity generation grows by 0.6% we should be worried. This is a rat that could be smelled by someone without a nose.

Similarly, household electricity consumption officially only grew by 2.2% last year. This is perplexing given that growth in household electricity consumption always outpaced growth in GDP in the past. If China’s GDP is really growing at 7% then why is the electricity being used in Chinese homes growing so slowly? For context, if it kept growing at 2.2% per year, it would take almost 60 years for China to catch up with Britain in terms of per-capita household electricity consumption.

If this rate of growth is real, then it might become politically troublesome for the Communist Party. The supposed deal between it and the Chinese people – we give you rapidly improved living conditions and you ignore the continued infringements of your human rights – does not look so good if it is going to take Chinese this long to catch up with the British in terms of electricity consumption.

Then we have cement. According to official data China produced 5.3% less cement in the first half of this year. Cement production is a relatively good proxy for the rate of construction in China. So, if the data is to be believed, China is now building infrastructure at a slower rate than before.

Likewise, steel production is down 1.3%, and demand apparently is down even more. This is a rapid turn around. The graph below shows historical annual growth in steel production in China up until 2014:

steelgrowth

So, somehow or another China has gone from GDP growth requiring more steel, to GDP growth being consistent with producing less steel. And all in the space of a couple of years, apparently. Another rat.

Either the physical basis of China’s economic growth has changed drastically in the last couple of years, or China is juking the stats. It’s hard to believe it is not the latter.

2 thoughts on “The latest batch of dubious economy statistics from China

    Arthur said:
    July 15, 2015 at 7:09 pm

    The juking seems to be a combination of higher-than-expected GDP and lower-than-expected emissions/electricity/coal/steel/cement?
    Or perhaps they are both higher than reality?

    Why do you say electricity stats are “viewed as reliable”? Absolutely reliable or relatively reliable?

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      Robert Wilson said:
      July 15, 2015 at 9:56 pm

      GDP growth is almost certainly fake. But given the fact that the stock market has tanked they were probably fearing the consequences of admitting the economy is in worse shape than it really is. But then again everyone probably realises the stats are fake so who are they fooling?

      Most of what I’ve seen suggests the electricity figures are reliable. First, it’s easy to measure it reliably because the load has to be managed and it’s just a bunch of big central facilities. Not difficult to get the numbers correct.

      They have also, unlike with coal, never revised historical electricity data significantly. There is also no real difference between aggregated provincial electricity data and national estimates. The same seems to hold with natural gas. Basically if it can be metered then it can be measured reliably.

      This is why many people, including top figures in the Communist Party, prefer to calculate economic growth using the likes of electricity generation and rail freight numbers. They aren’t manipulated and they are fairly reliable.

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