China’s GDP Figures Divide Economists, But How Does The Economy Look From Factory Floors And Storefronts?

SHANGHAI — China’s 2015 gross domestic product of 6.9 percent growth may have been just below expectation — and the worst for 25 years — but that didn’t stop economists' criticism of the figures as unreliable and inflated. Debate about the accuracy of China's official economic statistics always spikes when the GDP number is released, but on the factory floor this year there is a more nuanced take on how the world's second-largest economy is actually doing.

Long-term critics such as Gordon Chang, author of "The Coming Collapse of China," insist that real growth could be as low as 1 percent, based on factors like falling electricity use, which Beijing attributes to improving energy efficiency. Others, such as Julian Evans-Pritchard, an economist at Capital Economics in Beijing, are a bit less negative. He said that actual growth may be some 3 percentage points below the official figure. However, he said Tuesday: “Concerns about China’s outlook are still overdone,” and suggested growth in the last quarter of 2015 may actually have risen slightly, rather than declining as official figures suggest. He said that if “anything, with policy easing now providing greater support to activity, the short-run outlook is improving,” according to the South China Morning Post.

China's National Bureau of Statistics (NBS) head Wang Bao’an made it clear when he announced the GDP figures that collecting China’s economic data was a massive task. He told a news conference in Beijing that the calculation was based on data provided directly online by 1 million enterprises, in manufacturing, retail and service sectors. Wang stressed that there was "no interference or massaging of the figures." Wang said they were compiled in accordance with international best practices and were checked and verified by as many as 20,000 staff members. However, he said he'd nonetheless heard “some people say our statistics are an overestimate, others that they’re an underestimate,” according to Shanghai based news website the Paper.

Others see less divergence from the official data: This week ANZ Bank predicted 6.8 percent growth for the year, only marginally lower than the official 6.9 percent.

The Chinese government did recently acknowledge false reporting of some data by local authorities in the struggling heavy industrial heartland of northeast China — but long-term observers like Andy Rothman, chief China strategist at Matthews Asia, suggest the admission is a sign of progress.

“Back in '90s I think they deliberately fabricated lots of numbers,” he told International Business Times, “but in the last 10 years or so, I don’t see evidence that they’re deliberately fabricating numbers to a material extent at central level. There may be problems at local level, but the central government knows that — and they are I think doing a lot, including their own survey work, to get around the problem.”

Matthew Crabbe, director of Research, Asia-Pacific, at market consultancy Mintel, and author of "Myth-busting China’s Numbers," a book on Chinese statistics, told IBT the data were“as reliable as can be. I think the NBS has done a lot to improve data. There are some problems, but it’s basically fair," he said. "And the government has no reason to fudge — they need accurate data for their own purposes, and they’ve said they don’t want growth at all costs anymore anyway.”

Mei Xinyu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, argued: “What we’re seeking is not absolute growth but relative growth. When it comes to exports, these may be slower than before, but as long as we grow faster than our competitors in the global trading system, that’s OK,” he told IBT recently. “We have to adapt to the global economic climate.”

In an economy as large as China’s it’s clearly possible to find plenty of data, both positive and negative. While exports fell last year (though they rebounded in December in terms of the yuan, China's currency), and rising labor strikes testified to the pressure on some manufacturers, the country also saw double-digit growth in its retail and service sectors, and Chinese businesses continued to invest record sums abroad — including in a number of high-profile acquisitions of foreign companies.

So how did it feel to those on the ground? Businesspeople polled by IBT echoed the sense of a mixed picture. Indeed, leading economist Zhu Haibin of JPMorgan Chase has spoken of China having a "two-track economy" over the next few years.

David Zhuang, a Taiwanese textile manufacturer in southern Guangdong province, told IBT: “Orders from Europe were down 50 percent last year, and domestic ones were slacker too. We’re hoping for a better year in 2016 — but we say that every year.”

One European businessman, who manufactures construction materials in eastern Jiangsu province for export, said his own orders from abroad had remained reasonably healthy, but he had observed a clear slowdown in the business of some of his suppliers — though so far this was to his advantage.

“We used to deal with some very big companies, which often didn’t want to make orders for us because the quantities we ordered were not so big,” said the businessman, who asked not to be identified. “But over the past year I’ve had some of those companies calling me and asking whether I needed anything made, and they're now happy to take smaller orders.”

Shipping costs have shrank, too, he added, though he wondered whether some shipping routes — and indeed some of his suppliers — might eventually close if business remains slack.

But other manufacturers said domestic orders were holding up.

“We’ve been pretty busy. I think people in China have plenty of money at the moment, and our orders are quite good,” said Wang Hairong, a manufacturer of consumer gadgets in the southeastern city of Wenzhou, an area famous for its market-oriented private businesses. “But we have to be more flexible: Market trends move a lot faster now, with the influence of the internet,” he added. “We used to be able to make the same product for 10 years — now we have to change our range every six to eight months.”

Last summer Wang said he experienced a slowdown in orders from some European clients, following a sharp fall in the value of the euro against the yuan. But since then, he said, the effective 5 percent devaluation of the yuan against the U.S. dollar had been good for business:

“The great majority of our export deals are done in dollars, so it’s helped us,” he said. “Some people thought our prices were a bit high, but now they’re ordering more. At least they’re reassured that the [yuan] isn’t going to go up against the dollar at the moment!” he added.

Helen Chu, owner of a lifestyle store in Shanghai, said retail sales of high-end goods had generally been slower over the past year amid a marked slowdown in China’s luxury market. But she said she believed Chinese consumers were becoming “more rational,” and there was still a market for original products. “People still have money. I don’t think they have less, but they’re more careful about how they spend it,” Chu said. She said orders from U.S. customers had also bounced back, though those from Europe remained low.

Some foreign investors still see opportunities in China. Starbucks recently announced plans for some 2,000 more stores in the country, while others are still attracted by the combination of a relatively educated labor force and a large potential domestic market. Qualcomm recently announced a $280 million semiconductor and server venture in southwestern Guizhou province. AgCo, the world’s biggest agricultural machinery company, recently built a factory in Changzhou in Jiangsu province, its most modern in the world, to produce Massey Ferguson tractors for the Asian and Chinese markets. The company cited good infrastructure, a strong supply chain and the availability of skilled and experienced workers as factors in its decision.

China’s economy is clearly under unusual pressure — but for some, at least, its appeal remains.