China’s economy is growing more slowly than official data suggests and below potential, a Bloomberg survey indicates, helping explain why policy makers have stepped up stimulus and the move to boost exports with a weaker yuan.
The economy expanded 6.3 percent in the first half, compared to the officially reported 7 percent, according to the median estimate of 11 economists surveyed last week. For the full year, a 6.6 percent pace was the median forecast of respondents, who were asked to nominate real growth rates, not what they expect the official data to show. They estimate the economy’s potential expansion pace for this year is 7 percent.
The gap between the potential and estimated real rate of expansion highlights a cyclical slowdown that the government is trying to plug with looser monetary policy, increased fiscal support, and a weaker currency. Bloomberg’s monthly gross domestic product tracker has pegged growth below 7 percent all year, clocking a 6.6 percent pace in July.
“The actions of the government and central bank so far this year do indicate a certain amount of concern over economic growth,” said Patrick Franke, an economist at German savings bank Helaba in Frankfurt. “That would be easier to understand if they were aware that underlying/true growth was actually below, and not in line with, the 7 percent target.”
The recent flurry of measures to prop up growth in part are “extra insurance against an unwanted downshift in demand growth” he said. Signs indicating growth is lower than officially stated include power generation and weak demand for imports, said Franke.
The survey was conducted between August 10 and 13 on the basis that respondents’ forecasts would remain anonymous.
“Potential growth is on a slowing trend because of the slowing population growth and capital formation and also productivity growth,” said Chang Jian, chief China economist at Barclays Plc in Hong Kong.
Even at the government’s targeted pace of 7 percent for this year, the economy is heading for its slowest annual expansion in a quarter of a century. Producer prices slumped 5.4 percent last month, credit to the real economy plunged and consumer inflation remains at about half the target of 3 percent this year, suggesting threats to the goal.
China’s Communist government announces growth targets at annual confabs each year in a hangover from its Soviet-inspired past. The accuracy of the nation’s data has been questioned for years, with anomalies including discrepancies between regional and national numbers and inflated trade figures.
Back when Premier Li Keqiang was party secretary of Liaoning province, he said in 2007 that GDP figures were “man- made” and therefore unreliable, according to a diplomatic cable published by WikiLeaks in 2010. Ongoing measures to improve the quality of economic data include a June vow by the National Bureau of Statistics to expand an employment survey that Li says he wants to be “authoritative.”
First-half growth was just 6.2 percent while further deceleration in the second half will see full-year expansion of only 5.8 percent, estimates Wang Shenshen, a senior economist covering China with Okasan Securities Co. in Tokyo.
She peg’s the nation’s growth potential higher -- at about 8.1 percent this year -- but said getting close to that isn’t easy given the nation’s low investment efficiency and policy makers’ determination to deleverage the economy. Stimulus efforts won’t be able to push growth higher and are instead intended to put a floor under the economy, she said.
“If the government wants to push up GDP they know how to do it because the potential is higher,” she said. “But for the past two years the data has shown us that the government doesn’t want to do that.”
© Copyright 2023 Bloomberg News. All rights reserved.