China will release economic growth figures Wednesday for the first quarter of this year, figures that are always closely watched by the markets and interest-rate-setters around the world.
The barometer for the world’s second-largest economy has also become an important measure in the trade war between China and the United States. President Trump has repeatedly asserted that China’s slowing economy means it needs a trade deal with Washington.
But in a country where products ranging from eggs and honey to luxury bags can be faked, many economists wonder just how reliable the Chinese statistics are.
“Statistics are highly political in China,” said Jude Blanchette, head of the China practice at the Crumpton Group, a business intelligence firm, describing a constant effort to control information. “But how can a country be governed without access to good information?” he asked.
The Chinese government set its 2019 economic growth target at 6.0 to 6.5 percent, according to a report delivered by Premier Li Keqiang last month. The targets are a holdover from the central economic planning of the Mao Zedong era.
It had set a goal of 6.5 percent for 2018, and growth for the year came in at 6.6 percent. Although this was a pleasant surprise for many, it was still the slowest pace that China had recorded since 1990.
Those are the figures announced by China’s National Bureau of Statistics, but many analysts think they’re skewed. After all, the data is collected by local governments, which have an incentive to inflate their numbers because they are rewarded for meeting growth and investment targets.
"Since statistics contradict each other, many people doubt the government’s official numbers,” Xiang Songzuo, a former chief economist at Agricultural Bank of China, told Japan’s Nikkei in an interview published last month.
That, apparently, includes the central bank. The People’s Bank of China has its own set of growth statistics that it uses to make decisions about the economy.
Experts at the Brookings Institution went through the numbers and did their own calculations. In a study published last month, they estimated that China’s GDP growth between 2008 and 2016 was 1.7 percentage points lower than the official statistics suggested. If that holds true, China’s true growth last year would have been below 5 percent. Many economists think the growth rate is actually about 3 or 4 percent, while a handful even think it’s negative.
But in China, GDP is so politically sensitive that acknowledging such numbers is unthinkable.
Here are some alternative ways to measure China’s economy.
The Li Keqiang Index
This is the most-cited alternative measure of economic growth in China. Before he became China’s premier, Li was Communist Party secretary in the northern province of Liaoning. Back then, he suggested that China’s GDP data was “man-made” and told the U.S. ambassador to China at the time, Clark T. Randt Jr., that he preferred to use other indicators to get a picture of the economy. The ambassador’s account of their conversation was contained in one of the diplomatic cables released by WikiLeaks.
Li said he looks at three figures: electricity consumption; the volume of rail cargo, which he said was fairly accurate because fees are charged for each unit of weight; and the amount of loans disbursed, which he said also tended to be accurate, given the interest fees charged.
“By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are ‘for reference only,’ he said smiling,” the ambassador wrote back to Washington.
The Economist magazine went on to create a “Keqiang index” for China's economy.
The Excavator Index
Some economists have developed an “excavator index,” positing that heavy machinery sales are an indicator of infrastructure investment.
Highway, bridge, construction and other engineering projects rely on earthwork done by excavators. So, the market sale volume of excavators has become the microscopic window that observes fixed assets investment, the state-run People’s Daily reported in 2017.
There was a strong correlation between the “excavator index” and infrastructure construction, Zhou Qingjie, professor of economics at Beijing Technology and Business University, told the paper.
Sales of excavators reached 11,283 in May 2017, an increase of 105.65 percent from the previous year, the paper reported.
However, the index proved to be a little wanting. The overall economy grew only 6.9 percent in 2017 from the year before.
The Underwear Index
The economy in the northeastern province of Liaoning is doing well, JD Big Data Research Institute, part of one of China’s biggest online shopping sites, reported in December.
How did it know? Because sales of men’s underwear had risen for three years in a row. Sales of men's underwear across the province rose 42 percent in 2017 over the previous year, and then they rose 32 percent in 2018.
The index was a twist on the famous barometer put forward by former Federal Reserve chairman Alan Greenspan, who posited that declining the sales of men's underwear indicated a worsening state of the economy, and vice versa.
This index may have contained some truth. The economy in the province picked up markedly in 2018. “The recovery is mainly due to coal and steel prices rising during the period,” said Liang Qidong, vice president of the Liaoning Academy of Social Sciences. “The recovery can also be seen in the volume of railway and road freight, electricity consumption of industry, volume of business and employment,” he said, according to a Global Times report on the index.
The Instant Noodle Index
Some economists have said that instant noodle sales can be a useful indicator of a country’s overall economic situation. During good times, people spend money on better food. But during more financially difficult times, they tend to buy cheap food such as pot noodles instead of ordering restaurant meals.
In the first half of 2018, China’s two largest instant noodle companies — Master Kong and the Taiwan-based Uni-President Enterprises Corporation — reported that annual sales grew by 8.5 percent and 6 percent, respectively, according to Sixth Tone, an online publication. Meanwhile, food deliveries grew at the slowest rate since this became a trend, rising by a relatively low 18.4 percent.
The Pickle Index
To track migration in China, one government official was monitoring sales of a large, radish-like vegetable, or zhacai, from Fuling, a district of Chongqing.
The pickled vegetable is a staple dish of migrant workers, and consumption figures helped researchers track workers’ movement within China, a planning official at the National Development and Reform Commission (NDRC) told the Economic Observer in 2013.
Migrant workers move from their home provinces in rural, central areas to economic hubs in China’s south and east.
Declining sales of the vegetable appeared to support signs that the economy was slowing in 2013, the official said, according to the South China Morning Post.
The proportion of pickled vegetable sales in southern China fell from 49 percent in 2007 to 30 percent in 2011, while the share of sales in inland provinces steadily increased as migrants returned home. The Chongqing Fuling zhacai saw revenue from inland provinces increase by about 50 percent between 2011 and 2012, the paper reported at the time.
Liu Yang contributed to this report.