In economic analysis you have estimates and official data. Analysts estimate what they think the official number is going to be. They are successful if the estimate is close to the official target.
With China’s GDP it’s a bit different. The official number—6.9 percent for the third quarter of 2015—is more like an advertisement for the Chinese economy and has little to do with the situation on the ground. You can chose to buy the product, or not.
So sometimes GDP estimates for China are more accurate than the official data. Here are Epoch Times favorites for the third quarter of 2015
1. Lombard Street Research: 1.5 Percent Annualized
Rationale: Net exports subtracted a bigger chunk than first estimated. Quarter on quarter, we reckon growth was just 0.4 percent. Banks are saddled with bad debt, so cutting the lending rate will have a muted
effect on growth.
2. Gordon Chang: 1–2 percent annualized
Rationale: “Right now they’ve got an economy, which isn’t growing at the 7.0 percent, it’s more like 1 or 2 percent. In Beijing they’re even saying privately 2.2 percent.”
3. Li Keqiang Index: 3 percent annualized
Rationale: Premier Li probably wishes the 2007 memo from the U.S. State Department never got leaked. In it, he said official data was unreliable and rail cargo, electricity consumption, and new loans more accurately describe growth.
4. JP Morgan: 5 percent
Rationale: “We estimate every 1 percent slowdown in China takes about 0.5 percent off of global growth. That impact on emerging markets is more severe than on developed markets [around 1 percent],” J.P. Morgan’s head of research Joyce Chang said at a panel discussion at the Council on Foreign Relations on Sept. 16.
Since most of China’s trading partners like Japan and Russia have slowed more than 1 percent in recent quarters, even the 5 percent starts to look questionable.
5. Wilbur Ross: 4–5 Percent
Rationale: Billionaire investor Wilbur Ross has investments in China and closely follows what happens on the ground.
“The Chinese economy clearly is not growing at anything like 7 percent. We have felt for a couple of years that those figures were very, very generous. If you look at physical indicators—electricity consumption, natural gas consumption, oil consumption, cement consumption, steel consumption, telecom consumption, retails sales—if you look at all those indicators, none of them were growing at a rate that was equal to 7 percent and neither were the exports.”
“So we have felt for some time that the real growth is something less than 5 percent, probably nowadays something less than 4 percent.”
6. China Beige Book: No Change
Rationale: The independent research institution doesn’t put a number on GDP, but notes corporate profits were roughly stable in Q3.
“Those touting China’s sudden fragility are either exaggerating current problems or have entirely missed the slowdown of the past several years,” the report states.
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