China’s Official Statistics Paint Grim Economic Picture

By Jian Tianlun Created: February 5, 2013 Last Updated: February 15, 2013
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Containers are stacked at the Ningbo Port on June 21, 2012. China’s exports grew 7.9 percent last year—the first year in the last two decades to be under 20 percent. (Peter Parks/AFP/Getty Images)

Containers are stacked at the Ningbo Port on June 21, 2012. China’s exports grew 7.9 percent last year—the first year in the last two decades to be under 20 percent. (Peter Parks/AFP/Getty Images)

News Analysis

Not many people take the statistics coming out of China at face value. The Chinese regime and local governments have a long track record of manipulating or even completely fabricating economic data.
However, if more reliable data is not available, the data published by the National Bureau of Statistics of China remains the only one usable for analysis. No matter how unreliable it is, this data can still provide the ability to peek into the reality of China’s economy. 


According to the Bureau’s numbers, GDP growth slowed drastically in 2012, at least compared to recent years. The 2012 growth rate of 7.8 percent is the lowest within the past 13 years.

Taking the 7.8 percent at face value, the question remains whether China can return to double digit growth in the future. I believe it is very unlikely that China’s economic growth rate can recover to the levels of the past decade. 

This is because other statistics clearly illustrate that the slowdown of China’s economic growth in 2012 is both widespread and multi-faceted. It is not just investments; other areas such as exports and real estate are all showing much slower growth. In addition, the country’s overall demographic structure changed substantially. A continuous expansion of the labor force fuelled growth over the past decades. This trend has now reversed and China’s working age population is now shrinking. 

By looking at each part of the growth mix, we can see that a return to double digit growth is almost impossible. 


Let us take a look at the exports first. China’s exports in 2012 grew by 7.9 percent, down from 25 and 31 percent growth in 2011 and 2010, respectively. During the past 20 years, China’s exports have enjoyed a growth rate higher than 20 percent year after year. In fact, China’s economic boom was largely due to the rapid growth in exports. 

There are several reasons that slowed export growth. The slump of the global economy is certainly a factor. The increase of the cost of production has reduced China’s competitiveness. As the working age population plateaued, labor costs have rapidly increased in recent years. 

Labor Market

Wage inflation is partly due to the now shrinking labor force. For the first time in 2012, the work force aged between 15 and 59 dropped by 3.45 million or 0.4 percent when compared with that of 2011. If the speed of decline remains the same, it will have a huge impact on wages and future economic growth. 

During the past three decades, China’s exports benefited a lot from its cheap labor, thanks to the abundant supply of work-hungry Chinese that moved from the countryside to the booming cities. However, demographic change is one of the primary factors that boosted labor cost. 

In other words, the one-child policy, which generated a so called “demographic dividend” and enabled China’s GDP growth in the past, now has a negative influence. Now, the labor force is decreasing and the trend will last for several decades, before a turn-around, assuming a turn-around is even possible. 


Investment in infrastructure and production capital used to be the main driver of China’s GDP growth. However, last year’s growth rate of investment dropped from 24-25 percent to 20 percent. The decrease was especially noticeable in the real estate sector; it dropped from 27-28 percent to 16 percent. These are all the key factors that affect China’s GDP growth and cannot be turned around easily. 

I think China’s investment-driven growth model, which has been running for a long time, needs to change. In the past ten years, relying on huge investment to push GDP has caused severe environmental pollution. Without controlling investment quality and an improvement of the natural environment, there will be a substantial negative impact on society, the ecological balance, China’s economy as well as people’s quality of life.


As for consumption, its percentage contribution to GDP is decreasing year by year. It went down from over 50 percent in the 1960s and 1970s to over 30 percent now. The reason for the decrease, I believe, is the unequal wealth distribution. 

Inequality shows up in China’s Gini coefficient. A Gini coefficient of 0.4 means that income is unfairly distributed. If it is higher than 0.4, it shows a large gap in income levels and the high likelihood of social unrest. 

China’s officially published Gini coefficient is 0.47, already quite high. However, according to the Southwestern University of Finance and Economics, it has already reached 0.61 in 2010. This means the majority of Chinese people didn’t benefit from the economic growth. 

The general population’s increase in real income, adjusted for inflation, is minimal. Unaffordable real estate prices mean that a big percentage of people’s income is needed to buy a home. They also need to pay for medical insurance and education. Since disposable real income is not growing, the percentage of consumption in GDP is decreasing year by year. 

Ironically, nominal wages are still increasing, driving up the costs at many businesses. However, ordinary people are not benefiting, as their wage increases are eaten up by inflation in food, real estate and essential services. 


Looking closer at China’s 2012 income statistics, the average income increase for both rural and urban areas is around 10 percent, which is very impressive. However, a survey conducted by China Youth Daily shows a completely different picture. 

Seventy percent of the people in the survey said that their income didn’t’ increase in 2012. On one hand, national statistics say average income increased 10 percent or more; on the other hand 70 percent of the people say their income didn’t increase at all; a very sharp contradiction. 

Actually, there is no contradiction, as official numbers merely represent the “average” income. Only a very small number of people with big increases in income boost the average number. A popular jingle in China vividly explains this process: “There is a Rich Zhang in our village who has tens of millions; there are also nine broke guys who have nothing. If we calculate by average, everybody is Millionaire Zhang.”

The injustice in wealth distribution in China is caused by the distorted economic development model and the problems rooted in China’s social system—corruption, nepotism, financial repression, monopoly power and usurious pricing of recourse loans. The problems have worsened over the years, and the injustice in wealth distribution became more and more severe. 

Social injustice is a hot topic that is being talked about by people from all social levels, both outside and within the political circle. Many protests and demonstrations are related to it, and social conflicts are intensifying. The Chinese regime has to tackle all these issues if it wants to return to double digit growth. 

Tianlun Jian, Ph.D., writes regularly on the Chinese economy and advises The Epoch Times on economics. His blog is

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