How impressed should we all be about the somewhat astonishing announcement from China last week that its economy is way, way bigger than previous numbers indicated? Some analysts immediately began painting dramatic scenarios of China’s imminent ascent to Superpowerdom. (Though few, I suspect, stopped to consider just how teensy-weensy the output of the average Chinese worker is.)
The New York Times has an excellent piece on this subject, especially for those who are enamored of business stories (which I am not). Brief excerpt:
Even with the expected revision, China’s output per person will climb to a little more than $1,700 this year. It ranked 134th in income per person in 2003, according to the World Bank.
Though its statisticians are highly trained, China is still quite secretive about its methods and means for gathering economic data. This has long generated debate among economists, much as the Soviet Union’s economic figures did: some economists think China’s figures disguise weakness, while others think they hide strength.
The figures for China’s national accounts – the numbers that measure gross domestic product, including spending and trade – are supplied by its National Bureau of Statistics.
The bureau publishes several sets of statistics – some as often as monthly – based either on its own estimates or upon numbers supplied by China’s local governments. But those figures can vary widely. Totting up regional gross domestic product in 2003, for example, gives a figure of $1.6 trillion, 12 percent to 15 percent higher than the bureau’s own estimates.
The discrepancy also underscores a difference in incentives. Provincial and municipal authorities want to impress Beijing and limit any embarrassments, as the delays in reporting bird flu cases and the chemical spill in Jilin Province have shown.
Beijing worries more about its reputation in the rest of the world, where accuracy is paramount.
There are other reasons that huge swathes of the Chinese economy are unreported, said Frank Gong, the chief China economist for J. P. Morgan Chase.
“The way they collect the G.D.P. is really from supply-side, production-based statistics,” he said.
Mr. Gong suggested that collecting data from the demand side – what consumers actually spend – would be more telling.
In a system left over from when China was almost entirely a planned economy, however, all the factories and supermarkets report their own sales and spending.
Well, not so brief after all, sorry. Anyway, it does a good job of explaining how and why China’s statistics are so different from those of realother countries. Strangely enough, most countries believe they can still be great and worthwhile and still offer the world accurate statistics about their economies. Why does China feel if it doesn’t puff things up they’ll look bad? Don’t they get it, that it’s the puffing up that makes them look bad, not the numbers themselves?
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By Ivan
About the National Bureau of Statistics: (By: The National Bureau of Statistics):
The National Bureau of statistics covers an area of .487 square kilometres, in a 20 story building with 732 windows. With the opening up and peaceful rise of China, the National Bureau of Statistics has increased its production of statistics at an annual rate of 9 percent. Last year the National Bureau of Statistics produced 57,928,731 new statistics.
December 21, 2005 @ 5:01 am | Comment
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By Shanghai Slim
You made up 42.3% of those statistics, didn’t you!
December 21, 2005 @ 9:38 am | Comment
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By Algernon
I have been reading The Peking Duck and other websites about the PRC because recently here in the United Kingdom we have been bombarded by hype about how big and important the Chinese economy is and how soon it will overtake and take over the rest of the world, and I wanted to know more about the subject, i.e. the Chinese economy
I am no economist much less a clever man but I do have a reasonably good memory and I seem to remember that in May 2005 it was trumpeted by the Chinese Prime Minister that the PRC would have a $4 trillion economy by the year 2020. Now it does not require a degree in mathematics to work out that if the figure of approx $1.8 trillion economy ( this includes the $300 billion very recently found and included) then in the 16 years between now and 2020 the growth rate of the economy of the PRC is less than 5% compound if the target figure of $4 trillion for the economy is accepted. Where is the 9% growth rate that is always being talked about?
Various eminent economists have said that the economy of the the PRC is out of balance, and now as a result of the recently enlarged GDP it is not out of balance
This seems to my uneducated mind to be an example of the Chinese government refusing to admit that there is a problem until they have an answer to that particular problem. The answer was very simple – the National Bureau of Statistics simply increased the GDP figure for internal trade and who is to argue with them.
If my uneducated opinion is right then the figures produced by the National Bureau of Statistics are at best difficult to understand and interpret and at worst completely meaningless.
Can someone please point my mind in the right direction
December 21, 2005 @ 9:38 am | Comment
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By Falen
Welcome to the joy of being a “China Watcher”.
One thing you’ll learn VERY quickly about china is that everything about it is rife with contradictions. The very existent of chinese economy just simply defies conventional thinking. China aspire to stragically compete with US yet feel satisfied free-riding on the status quo of the US dominated world trade. Rapid reforms in the system must be balanced with the need of social stability.
There’s no easy way to fill China into a preset mode of thinking. If there’s one fast way to describe China today, then it is that China is very complex. Everything is a tough balancing act.
Take this GDP for example, China at one time or another has an interest in either understating or overstating its growth rate, yet they also has a stake in getting an accurate feel of the exact nature of economy.
I guess the the only recommendation would be to keep reading up about China, look two levels deep and think three steps ahead.
December 21, 2005 @ 11:00 am | Comment
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By Danfried
The NY Times article points out that the Beijing government wants accurate reporting, but local governments have an incentive to lie. If you read the article carefully you will note that the central government REDUCES the GDP figures supplied to it by regional governments — it is obvious to everyone that locally produced figures are not trustworthy.
I think anyone who is familiar with how economic data is gathered in China should have realized that the size of the service sector of the economy was _severely_ UNDERreported. How many cash businesses in China do you think report their actual sales? Do you think that sidewalk vendors show up in official statistics?
Anyone who has visited here should have realized how the service sector has boomed. In the Seventies, most workers got two hour lunch breaks and went home to eat — because there were only a handful of restaurants. Now you can’t walk down any street in Beijing without passing a dozen new restaurants…
Walk down any street in China and the number of new small businesses of every sort is staggering — everything from photocopying centres to pet groomers can be found within a block of my apartment, and you can believe that none of them existed more than a few years ago.
Unfortunately, Western economists and journalists seem to have focused almost entirely on manufacturing and farming. I think the new articles show that these economists are finally realizing their mistake — but only after the Chinese released these new figures.
December 21, 2005 @ 11:03 am | Comment
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By Elaine Supkis
Anyone who thinks the USA government produces good statistics is naive at best!
THEY ALL LIE. Lying is hyper important to any ruler, especially here in America. The lies about our currency, just for one example, have become so cock-eyed, the Feds simply decided to NOT TELL US ANYMORE.
So no more stats! Great! Guess China is exporting their style of informing us, eh? Bush is imitating them just great.
Great.
December 21, 2005 @ 3:54 pm | Comment
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By richard
I don’t believe that we lie about statistics; I’d need some evidence. I agree, governments lie, but we constantly put out statsistics that show us doing very poorly and that do not reflect well on the government. Too much work goes into these statistics in America with too many levels of bureaucracy, which means whistleblowing is easy. What “lies about our currency” are you referring to?
December 21, 2005 @ 4:54 pm | Comment
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By xing
One thing I don’t quite understand here in the US is how the inflation rate is calculated. In the last 2 or 3 years, food and gas prices have increased so much (some by as much as 70%, like food) and these things have the most to do with life of average people. But the inflation increased by less than 2 or 3% a year.
December 21, 2005 @ 7:10 pm | Comment
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By richard
Xing, there has been something close to a deflation in America in certain areas for some years — namely commodities like coffee, grain, etc., and cheap goods from China have helped push prices lower and lower. Look at how cheap it is to buy a DVD player or a TV, or a lot of sytuff in the supermarket (living in Taiwan, I really have come to appreciate just how low prices are in America!). Even though gasoline prices in the US are relatively high, this is balanced by cheap goods in other sectors. And our gas prices are still low by international standards.
December 21, 2005 @ 7:19 pm | Comment
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By xing
Richard,
That’s what I read on newspaper. But I still don’t know how the inflation rate is calculated. Maybe the food price is just a small factor in the calculation, but for most people, it is big.
December 21, 2005 @ 7:32 pm | Comment
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By dylan
The most ironic thing is that the figures given out by the provincial governments, who everyone says were lying, were actually more accurate than those of the central authorities (if you add up all the provincial estimates for 2004, the total is closer to the newly revised GDP than the old NBS figure).
December 21, 2005 @ 8:08 pm | Comment
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By sun bin
i don’t think china has any intention or incentive to lie.
however, as mentioned above, it is the way bureaucrats get their appraisal that distorted the number. plus out-date methodology, inefficient management, etc.
as for me, this is what i care
1. the number could be wrong by 10%, or 30% or 50%. it makes not much difference in conclusion. GDP/cap is still $1000-2000
2. as long as they error is systematic every year, the growth % could then be quite accurate, and we can use that as a good indicator.
therefore, there are fault at the stats, but it does not really change our conclusion about china’s economy
1. it is still under-developed and poor, even the size is not small (1.3bn ppl)
2. the growth is significant, as can be observe when you travel in china, and can be understood as growth from a rather small base.
December 22, 2005 @ 2:16 am | Comment
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By ming
Xing
I think the UKand EU’s inflation rates are also questionable. With energy prices virtually double and our inflation rates still remain under 2.5%.
My peronal petrol expenses doubled over the year and the inflation still 2% in the UK!
I believe stats are cooked to suit goverment agenda.
December 28, 2005 @ 11:26 am | Comment
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By Algernon
Ming
If I have understood your e-mail correctly you are saying that you are paying twice the price for petrol in the year 2004/2005. I suggest you change your filling station. The price I pay for diesel has gone up by 12% over the year, and I think that petrol is about the same
Algernon
December 30, 2005 @ 5:41 am | Comment
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By wankington
how much is a duck in english pounds (£)
October 5, 2006 @ 8:05 pm | Comment
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By wankington
well i was having a good long sniff at my duck and yeh…………………………………all rite ku n josh ur now famous
October 5, 2006 @ 8:10 pm | Comment