China’s National Bureau of Statistics has come out with the GDP growth rate for Q1 and pegged it at 5%. This is a number that deserves some thought. First of all, the annual growth rate approved at the NPC last month was a range between 4.5 to 5%, which gave a sense of flexibility in terms of expectations, and perhaps an alignment somewhat closer to reality.
The IMF earlier this week published its latest estimate of China’s GDP growth rate for this year, putting it at 4.4%. But one of our Idols in terms of China economic research, Michael Pettis, disagreed with this estimate, pointing out—we would say accurately—that it is entirely up to the system to decide what number the GDP growth rate will hit, not because it is being faked, but because they have the power to boost various elements of the economy, such as infrastructure spending, in order to meet whatever number is required.
There is obviously to some extent a relationship between the GDP growth number and the real economy. Although we don’t know exactly how closely those two things match. We do know, though, that Beijing is very interested in maintaining a sense of calm amongst ordinary people and the business community—and amongst the 100 million or so party members who run this place. And that amongst other things involves providing a clear sense that they have everything under control and that everything is okay. The GDP growth number is a key factor in and reflection of that, one that is watched closely, both domestically and internationally. And internationally, too, they are also interested in conveying the perception that China is stable and well-run and developing steadily. There is an opportunity—which they are seizing—to boost China’s standing in the Global South and other parts of the world in contrast to the sense that the world is getting of Trumpian America. And the number 5 plays well into that.
Statistics are a tricky thing to rely upon too much in the China world, and anecdotal evidence is an important supplement. There are some conversations these days which suggest that there might be a turnaround, a slight sense of an upturn, but most conversations still seem to reflect no shift in either sentiment or prospects for the economy. Five percent growth, of course, is a stellar number for most economies in the world.
And there’s always been the question of what growth rate is required to keep China stable and below what number it might become somewhat less than stable. And it could be they have decided that five is the bottom line. Cue lots of extra tea leaf reading. But China is China. And that’s the fun of it.
Make sure your children are okay and have a great weekend.