A lone shopper in the Japanese retailer Muji at a mall in Shanghai during the 2018 festive season. Photo: AFP

If you thought the 2018 figures had a fantasy feel, wait until this year. As expected, the National Bureau of Statistics released a raft of official data on Monday. Most of it was predictable. But the big question being asked was whether China’s cooling economy would turn into a sudden freeze?

“What China can really do this year is to prevent deflation, prevent a recession and a hard landing in the economy,” Chen Xingdong, the chief China economist at French international banking group BNP Paribas, said.

A glance at the benchmark number showed that GDP growth for 2018 slowed to 6.6%, a level not seen since 1990. Yet it was still slightly higher than the original target of 6.5%.

For last year’s fourth quarter, GDP growth was 6.4% compared to the same period in 2017 and down from the third-quarter figure of 6.5%.

Industrial output staged a mini-revival, growing by 5.7% in December from the same period in 2017 and outpacing November’s 5.4% growth.

Retail sales also increased by 8.2% in December year-on-year, which was higher than November’s 8.1%.

“The official GDP figures have been too stable in recent years to be a good guide to China’s economic performance,” Julian Evans-Pritchard, the senior China economist at research consultancy Capital Economics, said.


“Sceptics will be forgiven for questioning whether the NBS [the National Bureau of Statistics] is trying to smooth GDP growth by shifting some of the recent weakness into the 2017 figures,” he added.

Indeed, the conundrum remains about the veracity of China’s statistical reporting with a growing number of analysts and economists expressing varying degrees of skepticism.

Xiang Songzuo, a professor at Renmin University’s School of Finance, is at the controversial end of the spectrum.

He told a seminar last month that President Xi Jinping’s government was playing a game of smoke and mirrors.

“How bad are things? The number that China’s National Bureau of Statistics gives is 6.5%, but a research group of an important institution released an internal report. Can you take a guess on the GDP growth rate that they came up with using the NBS data?” Xiang said.

“They used two measurements. Going by the first estimate, China’s GDP growth this year [2018] was about 1.67%. And according to the other calculation, the growth rate was negative,” Xiang, the former chief economist of the Agricultural Bank of China, one of the big four state lenders, added in a translated version of his speech on the influential China Change website.

Recurring theme

In the past few months, this has become a recurring theme.

Alex Capri, a visiting senior fellow at the National University of Singapore’s Business School, highlighted the issue in the New Year.

“I do believe the numbers are worse than reported, of course, in that type of political environment where there’s strong censorship, where media is essentially prevented from reporting,” he said.

Xie Guozhong, an independent economist based in Shanghai, illustrated the depth of the problem when he told Asia Times last week that he was suspicious of China’s calculations.

“We cannot trust official statistics. There is no reliable official data available, which is a real challenge to assess the state of the economy,” Xie said.

Others have been less vocal but just as “concerned.” “China’s GDP number is not an accurate gauge of economic growth,” Raymond Yeung, an economist at ANZ bank, told AFP.

Louis Kuijs, the head of Asia economics at Oxford Economics, went even further after the figures were announced.

“The NBS is part of the government … that is why it is legitimate for the outside world to worry about the potential adjustment of data on the economy,” Kuijs said.

What is not in dispute is that China has suffered collateral damage from the trade war with the United States.

Crucial 12 months

Again, this comes at a time when Beijing is realigning the economy from export-driven to consumer and high-tech fueled growth. Turning around the juggernaut will involve a certain amount of pain.

Moreover, the next 12 months will be crucial, starting with the second round of renewed peace talks in Washington.

Last week, the Ministry of Commerce confirmed that Xi’s economic czar, Vice-Premier Liu He, will meet US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer on January 30-31.

The discussions will take place just weeks after a mid-level meeting prepared the groundwork following the trade-dispute truce thrashed out by US President Donald Trump and China’s head of state Xi at the Group of 20 summit in Buenos Aires last month.

“Everyone is widely concerned about the direction of the international situation where there are many variables and uncertain factors,” Ning Jizhe, the head of the National Bureau of Statistics, said, adding that “trade protectionism” was in vogue.

“For the world’s second-largest economy, where trade accounts for one-third of GDP, this has an impact,” he added.

Anxieties about rising unemployment were also evident from the slew of stats with December’s rate hitting 4.9%. This reflects the human cost of the slowdown.

Already the government has announced new measures worth 1.3 trillion yuan (US$193 billion) to stimulate the economy, including tax cuts for small businesses.

Monetary policy will also be eased to boost targeted infrastructure spending on state-backed projects such as road and rail links.

“The unemployment number in the data has edged up and we should not ignore that,” Christy Tan, the Asia head of markets strategy research at the National Australia Bank in Singapore, told Reuters.

Overall, this has been a challenging 12 months with manufacturing activity and consumer spending showing signs of stress.

Smartphone shipments have also posted all the wrong numbers, plunging 15.5% last year, while auto sales fell 5.8% in 2018 to 22.35 million vehicles.

“The potential growth rate is indeed dropping. It is highly possible that the real GDP [gross domestic product] growth rate in China is already below the potential rate,” Wei Jianing, a research fellow at the Development Research Center of the powerful State Council, said.

“This means unemployment will soon become an issue impacting social stability,” Wei added.

How that plays out in the months ahead will be eagerly watched along with growing concerns about dodgy “data.”

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now. 

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