Its never easy interpreting China’s statistics. Partly this is due to the sheer impossibility of producing accurate numbers in an emerging economy. It is also made difficult by the fact that as the incoming premier Li Keqiang noted some years ago, its GDP statistics are “man-made and therefore unreliable”.
This doesn’t mean, however, that China’s announced 7.4% GDP growth in Q3 is necessarily wrong. But it does need to be considered alongside other evidence from statistics that Li has called reliable. As shown in the chart above, these suggest the picture is more complex than first meets the eye:
• Electricity consumption (green line) grew just 3.5% versus 2011, and only 2.9% in September
• Until last year, it was growing at higher levels than GDP
• Major user demand actually fell 0.1%, and industrial use (70% of total demand) rose only 1%
• Bank lending (red column) has been rising, up 15% this year versus 2011
• Q3 lending was up 24%, maintaining the pick-up since Q2
• This seems to have been focused on the State-Owned Enterprises
The electricity data certainly seems in line with reports on the ground of slow growth in the private sector. It is also supported by the very slow growth seen in polyethylene demand. Normally this should equal GDP, but in 2012 it has been up just 2% versus 2011.
It therefore seems likely that the growth in lending has a political focus, ahead of next month’s Party Congress to appoint new leaders. Loans into the real estate sector were up 29% on Q2, whilst Rmb 7tn ($1.12tn) of loans have been approved since May to support local government infrastructure spending. This is ~15% of total annual GDP.
But this lending will have done nothing to support the announced policy transition towards increasing personal consumption. This is supposed to be the key focus of the 12th Five Year Plan which runs to 2015. But consumption’s share of GDP actually fell to 4.2% by end-Q3 versus 6.4% in Q1 – the lowest since Q3 2009.
As a commentator in China Daily noted, “fundamental change is easier than done“. And he warned “the new leaders will have to make tough choices quickly if they are to alter the direction of the country for the better“.