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China’s Q2 GDP Number Is Irrelevant

Business, China, Company Strategy, Economics
By John Richardson on 15-Jul-2014

By John Richardson

China-Economic-GrowthCHINA is due to release its second-quarter GDP growth number today (Wednesday) and so the analytical frenzy is already well under way.

For example,  AFP writes in this article: “Chinese growth failed to accelerate in the second quarter despite government stimulus measures, an AFP survey predicts, with the world’s second-largest economy forecast to record its worst annual performance in 24 years.

“China’s gross domestic product (GDP) expanded 7.4% in the three months to June from the same period last year, according to the median forecast in AFP’s survey of 17 economists.”

Stock markets, and probably commodity markets including chemicals, will no doubt respond positively or negatively depending on the actual number

But China’s GDP data is “man-made and therefore unreliable”, according to Li Keqiang, the country’s Premier.

And so ignore any report you read that uses the Q2 GDP number as the basis for interpreting where the Chinese economy is heading.

Here are three essential facts that you need to remember about how GDP is calculated in China:

•China is the only country to declare its GDP figure only two weeks past the end of each quarter.

•It is the only country that never revises its GDP figure.

•It is also the only country where all the provinces routinely report GDP numbers higher than the national figure.

And so what should we use to  measure where China is really heading?  Right now, most of the focus needs to be on the property market.