China on Friday revised up its nominal 2018 gross domestic product (GDP) by 2.1 per cent to 91.93 trillion yuan (S$17.8 trillion), keeping it on track to achieving its goal of doubling the size of its economy by 2020 from 2010. However, with the economy growing at its weakest pace in nearly three decades, the revisions could fuel scepticism about the credibility of Chinese data with some analysts suspecting authorities may be massaging the numbers to achieve Beijing’s ambitious targets.
In a statement, the National Bureau of Statistics (NBS) said the change in the size of 2018 GDP will not significantly influence the calculation for the 2019 growth rate. Yet some analysts suggest the nominal nudge may actually not be so nominal after all. Despite NBS stressing that the current round of revisions is the result of the census uncovering previously unrecorded activity, it’s hard to ignore the fact that it will also help them meet official growth targets, said Julian Evans-Pritchard, Senior China Economist at Capital Economics, in a note.
In previous revisions real growth has almost always been revised upwards, he said.
Indeed, growth of about 6.2 per cent is seen needed for the whole of this year and the next to meet the Communist Party’s longstanding goal of doubling GDP and incomes in the decade to 2020. Such a rate of expansion would be a stiff ask given the 6.0 per cent GDP growth logged in the third quarter – the slowest pace since 1992 – and with many analysts tipping the pace to slip below 6 per cent in 2020.
A slowdown in demand at home and abroad has weakened the world’s second-biggest economy, in part with business investment and factory activity hit by a trade war with the United States.
China routinely revises its annual GDP data. Days before GDP data for 2018 was released in January, the statistics bureau cut its final 2017 growth figure to 6.8 per cent from 6.9 per cent.
China’s fourth National Economic Census, released on Wednesday, included “richer” data points that showed more business entities and a bigger total asset base in 2018 than assumed under earlier GDP estimates, Li Xiaochao, deputy head of the statistics bureau, told Reuters earlier this week. Revisions to historical GDP figures will also be made, Li told reporters.
The services sector contributed more to GDP in 2018 than the original data had indicated, the statistical bureau said. Nominal GDP includes changes in prices due to inflation, so it is usually higher than adjusted or real GDP. Analysts say that without further information from the NBS, it’s hard to calculate the impact of the latest adjustments on the 2018’s real GDP or the GDP growth rate for that year.
But a rough estimate of an adjusted real GDP growth in 2018 might be 8.9 per cent, compared to an original reading of 6.6 per cent, said Chaoping Zhu, Global Market Strategist at JP Morgan Asset Management, in a note. The government’s target range for 2019 growth is 6 per cent-6.5 per cent. The economy expanded 6.4 per cent in the first quarter, 6.2 per cent in the second and 6.0 per cent in the third – the weakest pace since 1992. If the 2018 figure is revised up, the government might be more tolerant of an economic slowdown next year and set a lower growth goal in 2020, said Zhu.
As the deadline for doubling the size of the economy draws nearer, it’s become increasingly clear that the target was too ambitious, said Evans-Pritchard. Our research suggests that political pressure to meet growth targets has encouraged the National Bureau of Statistics (NBS) to massage the GDP deflator in recent years. The GDP deflator is the ratio of nominal to real GDP.
In an email to Reuters, Louis Kuijs, head of Asia economics at Oxford Economics, said he would not discount the possibility of the NBS massaging the data. However, an upward revision by the NBS is neither surprising nor unreasonable, he said, noting that newly included sectors in statistical coverage tend to grow quickly.
Also, outside of China, revisions of the size of economies are almost always upwards, he said.
A paper published by the US-based Brookings Institution earlier this year said China had overestimated nominal and real growth rates by about 2 percentage points between 2008 and 2016.