Mon. Dec 9th, 2019

Revisions to GDP put China on a dual economy target, but data concerns persist

China revised its 2018 nominal gross domestic product (GDP) by 2.1% to 91.93 trillion yuan ($13.08 trillion) on Friday, keeping it on track to achieve its objective of doubling the size of its economy by 2020.

However, with the economy growing at its slowest pace in roughly three decades, adjustments could fuel scepticism about the credibility of Chinese data with some analysts suspecting authorities being able to massage the numbers to achieve the ambitious goals of Beijing.

The National Bureau of Statistics (NBS) said in a statement that the 2018 GDP change in size will not have a significant impact on the calculation of the growth rate for 2019.

However, some analysts suggest that after all, the nominal nudge may not be so nominal.

Although “NBS emphasizes that the current round of adjustments is the result of the census exposing previously unrecorded activity, it is difficult to ignore the fact that it will also help them meet official growth targets,” Julian Evans-Pritchard, Senior China Economist at Capital Economics, said in a note.

Real growth has almost always been revised upwards in previous revisions, he said.

Nonetheless, growth of around 6.2% is expected this year as a whole and the next year to achieve the long-standing target of the Communist Party to double GDP and wages over the decade to 2020.

Such an expansion rate would be a stiff question given the 6.0% GDP growth recorded in the third quarter–the slowest pace since 1992–and with many analysts tipping the pace to slip below 6% in 2020.

A slowdown in demand at home and abroad has weakened the world’s second-biggest economy, partly due to a trade war with the United States hitting business investment and factory activity.

China revises its annual GDP data on a regular basis. Days prior to the publication of GDP results for 2018 in January, the statistical department reduced the final growth rate for 2017 from 6.9% to 6.8%.

China’s fourth National Economic Census, released on Wednesday, included “rich” data points showing more business entities and a larger total asset base in 2018 than expected from earlier GDP estimates, Reuters said earlier this week Li Xiaochao, deputy head of the statistics office.

Li told reporters that changes will also be made to existing GDP figures.

In 2018, the services sector contributed more to GDP than was indicated by the original data, the statistical office said. Nominal GDP includes inflation-related price changes, so they are usually higher than adjusted or real GDP.

Analysts say it is difficult to calculate the impact of the latest adjustments on the real GDP of 2018 or the growth rate of GDP for that year without further information from the NBS.

However, a rough estimate of adjusted real GDP growth in 2018 could be 8.9% compared to an initial 6.6% reading, said Chaoping Zhu, J.P’s Global Market Strategist. Management of Morgan Assets, in a note.