Tuesday 21 April 2009


CHINA'S GROWTH IS UP SHARPLY

Cris Sholto Heaton

MoneyWeek, Apr 20, 2009

Can 6% growth be better than 7%? Only in the upside-down world of Chinese statistics.

"China is still slowing," said the headlines last week. At 6.1%, GDP growth was the lowest since 1992 and almost a full percentage point down from the previous quarter. But oddly, that's a lot more encouraging than it sounds.

It's quite likely that China actually grew faster this quarter than last, despite the headline numbers. Indeed there's mounting evidence that the economy is past the worst and starting to pick up again.

However there are still plenty of risks ahead and we're certainly not back in boom times yet even if China is handling the slowdown a lot better than many feared.

Measuring Chinese growth isn't easy
First, let's take a look at that GDP number. How can 6.1% be better than Q408's 6.8%? It's all down to the way China measures growth.

Most countries report GDP on a quarter-on-quarter, seasonally adjusted, basis. That means they measure the size of the economy in Q109 and Q408, calculate the change, adjust that for the seasonal differences (because economic activity is always higher in some parts of the year than others) and then report the result.

Some countries, such as the US, report this at an annualised rate – how much the economy would grow if it continued at the latest quarterly pace for a year. Others, including Britain, report the quarterly number and leave you to multiply it by four to make a like for like comparison.

But a number of other countries – usually developing ones – report growth on a year-over-year basis. That means comparing say Q109 to Q108. This is what China does. The problem is that year-on-year numbers reveal the underlying trend much slower than quarter-on-quarter ones. If you have a great first half and a poor second one, the overall number for the fourth quarter can still look fine even if the economy actually shrank when compared to the previous three months.

This is exactly what happened in the fourth quarter with China. We even had a number of pundits proclaiming the 6.8% figure as evidence that China fixes its statistics. That's not impossible but it wasn't the cause of the somewhat odd numbers this time.

(…) [artículo aquí]

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