China said its economy grew 7.6% in the second quarter compared with a year earlier, according to the latest government figures. But the real story may be bleaker still.
According to the latest GDP figures released by China’s Bureau of Statistics last week, the economy slowed to its weakest pace of expansion. China’s Vice Premier, Li Keqiang was famously quoted in a diplomatic report as saying that the data that is used to concoct China’s gross domestic product are “man-made” and “for reference only.” Li’s comments, which were made public via WikiLeaks in 2010, are particularly valuable in instances where there may be bad news.
And if you believe China’s electricity data, then the news is worse than 7.6%.
China’s electricity output in June 2012 was 393.4 billion kilowatt-hours (kWh) — the same amount as used in 2011 (these numbers are also courtesy of the National Bureau of Statistics). This rate of year on year increase is the lowest since 2009, excepting January of this year when the month included China’s week-long spring festival holiday.
And lest you be tempted to think that the June number is caused by an inordinately cool month (when people run their air conditioners less), for 2012 to date, power production is up only 3.7 percent over 2011, which makes the growth rate less than a third of last year’s.
The reason that we are reading electric metres to find out which way the economy is going is because of the traditionally political nature of China’s economic data. In China’s top-down, bureaucratic government, officials are given targets by the central authorities for GDP. These same officials traditionally have been promoted on their success in making their numbers. So you can guess what happens.
Even if you are using China’s GDP numbers only to compare to previous China GDP numbers and disregard any independently verifiable standard, the economy still looks a bit discouraging. At 7.6% China’s growth is as low as it has been since the global financial crisis in 2009, when it slid to 6.6%
While the US or Europe would be happy to have growth at this pace, bear in mind that China has grown at an average rate of about 10% for the last decade. After these years of rapid expansion, the population is accustomed to rapid improvements in conditions, and the government starts to get pretty nervous about what might happen if things slow down too much.
The central government has already launched efforts to stabilize the economy by cutting interest rates twice since early June, boosting bank lending and pushing forward more infrastructure projects. So look for a new subway line in your neighborhood — coming soon!