Volts Don’t Lie? An Alternative Approach to Calculating China’s Growth

China Real Time looks at problems and complications with the Li Keqiang-endorsed use of electricity production as an indicator of economic output. Factors ranging from coal prices to the weather can distort the picture.

China’s Vice Premier Li Keqiang said in 2007 that the GDP data for the world’s second largest economy was ‘man made’ and not to be trusted. Instead, the then Party Secretary of Liaoning Province said, he relied on electricity production, train freight and bank loan data as a guide to the state of the economy ….

With some of China’s main growth indicators putting in a dismal performance in the last few months, and concerns about a hard landing for the economy, the electricity data provides an optimistic counterpoint. Following a weak April and May, electricity output was up 16.2% year-on-year in June, suggesting a strengthening economy. That contrasts with a weak reading from the preliminary HSBC PMI report in July, which suggested contraction is on the cards.

But before breaking out the celebratory baijiu and heading out for karaoke, China’s economic policy makers should consider a few shortcomings of the electricity output data as a guide to growth ….

July 29, 2011 5:49 PM
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Categories: Economy