Source: IMF WEO October 2019 (Hong Kong, Macau and Taiwan are excluded for comparison only)
National Output (GDP)
GDP is probably the best understood of all the indices, as it is the one most commonly referenced in the news. It widely used a catchall figure for pundits and commentators to say whether things are going well or not. It is compiled by the National Bureau of Statistics (NBS) on a quarterly and yearly basis and is an estimate of the size and growth of the Chinese economy at large. As you can imagine, this is a mind-bendingly complex task and as such needs to be handled with care.
Technically speaking, GDP refers to the market value of all officially recognized goods and services produced in a country over a given period of time. It is a figure that is estimated in China by extrapolation from production-side data, in contrast to the US where the figure is calculated on an expenditure basis. To do this, the NBS divides the economy into 94 sectors and uses a number of tools to estimate the total size of the economy. This figure is well below the figure used in many developed economies.
The published data is broken down as follows:
- Growth Rate of Value-Added of Industry (Primary, Secondary, Tertiary)
- Growth Rate of Value-Added of Industry by Sector
- Output of Major Products
- Value-Added of Industry by type
- Energy Consumption
The sheer scale of this task and the number of different agencies involved in the task means that the numbers are potentially subject to manipulation at almost every juncture, particularly as this figure is one of the primary benchmarks against which the Chinese government measures the success of its economic policy. For decades now, the Chinese government has seen 8 percent as an almost talismanic figure, increasing the pressure at all levels for manipulation. In recent years, the NBS has done a great deal to try to shore up the reliability of the way in which this figure is calculated and in general it is seen as far more reliable now.
Aside from the obvious problems in accurately calculating this data in the first place, and relative ease with which the data can be manipulated at each administrative level, there are more general problems with using GDP as a measure of economic progress. Not least of which is that GDP tends to overstate growth during periods of transition to a market economy because it does not take account for household production in agricultural societies. It also makes no account for the depletion of natural resources and environmental degradation. Factors that may soon need to be taken into consideration given the public debate going on in China.
A breakdown of GDP by sector output, expenditure and region is a powerful tool for policymakers concerned with maintaining social stability. For instance, a growing role for investment and shrinking household consumption can indicate an unbalanced growth model. And the fact that GDP per capita in the shining east coast region is more than double its its impoverished interior citizens.
But importantly for Beijing, its a measure of the country’s growing economic power in relation to other nations -first outstripping Britain and France and then Germany to become the second largest economy in the world.