Date: 14 Sep 2015, Economics and Finance
Question setter: John Karslake

China GDP

Will China announce a Gross Domestic Product (GDP) Annual Growth Rate of 6.9% or above for its third quarter 2015?


Response:


Answer: No
Confidence level: 66%
Mean confidence level (all requests): 33.00%

Justification:
Rumours are swirling of a really sharp slowdown in Chinese growth, far greater than the authorities are admitting. Some think that they are hiding a recession.This is unlikely but August economic data from factory orders to car sales do indicate worse than expected figures. Power output has also declined, which is a key indicator that growth rates are falling. I would expect 3rd quarter figures to be marginally below forecasts, in the range of 6-6.9%. Premier Li Kequiang is reassuring investors that China is a source of growth , not risk. If GDP were likely to be any lower than 6% he would be unlikely to be making those statements at this stage. Moreover there has been scant evidence that the government has knowingly published false figures historically, though, of course, they may have felt no need while everything was on the up. It would be a difficult charade to maintain over any length of time and probably not considered worth the loss of credibility even where state control is so strong. So, £rd qtr GDP is likely to be marginally below market forecasts of 6.94% but based on the best true estimates available.

Outcome: Yes
Score: -66
Mean score (all respondents): -33.00

Expert opinion:


Answer: No

Selected Expert Answer from Mettletest Panellist:
OXFORD ANALYTICA:
We think that it will be around 7% (in the 6.5% - 7.5% range)
China's GDP figures are among the most closely watched economic data in the world. Yet the media and researchers question their reliability, particularly now that growth is slowing, fearing that the political imperative of demonstrating economic competence will push the leadership to 'massage' the figures. In fact, China's statistical system is under intense pressure to produce reliable data, and numerous innovations have been undertaken to upgrade it.
What next
Chinese economic data have many weaknesses, but any political influence on national GDP data is probably indirect and very rare. As growth stabilizes around a long-term trend, measuring the economy will become easier and more accurate.
Subsidiary Impacts
Political influence on economic data is primarily at the provincial and local levels.
• Difficulties in compiling accurate data imply some flexibility for the NBS in determining the values of short-run indicators.
• Quinquennial revisions based on economic censuses will continue to provide the most reliable data.

Answer: No

Selected Expert Answer from Mettletest Panel:
Announcements from the Chinese government and recent data indicate that growth rates are slowing and that the likelihood is that Jul-Sep GDP will undershoot the 7% previously forecast. China is pre-empting this news with proposals for growth, including the part-privitisation of state enterprises. This is after repeated cuts in interest rates and the relaxation of banks' reserve requirements to stimulate the economy. The stock market has suffered heavy falls, in the wake of Yuan devaluation, another indication of official concern that the pace is slowing. There have been disappointing figures on fixed-asset investment and August factory output, while some experienced commentators point to low electricity usage as a sure indicator that all is not well. Continued falling car sale confirm this. However, I do not believe we are in negative territory, as some theorists do. Otherwise I would not expect officials to put their necks on the line with relatively upbeat statements. Premier Li Keqiang declated last week that the economy is still moving positively. So, under 6.9%, but not that much under, I reckon.


Outcome: Yes

Comment on outcome from Mettletest Panellist:
Expectations have been confounded - China's 3rd quarter GDP DID come in at 6.9%. A recent Bloomberg poll had the consensus at only 6.7%. It appears that the Chinese services sector compensated for the weakness in manufacturing and property. The slowdown in the latter two was correctly identified by clever analysis of electricity use and building but few economists realised how strong the emerging services sector has become.
Overall, there is still concern at how growth can be sustained in the future. These GDP figures show the weakest growth since 2009. Further slowdown is predicted in the coming years, even if this is the worst in the short-term. Many commentators think the official statistics are overstated and that real growth is weaker.