Merryn's Blog

China’s official growth figures are made up. Don’t believe them for a minute

Officially, the Chinese economy is still growing at over 7%. But there is no way that is true, says Merryn Somerset Webb. Here’s why.


I was listening to Radio 4 at breakfast time last week, when someone came on to talk about Chinese economic growth. We should not, she said, be too worried about it. After all, the Chinese economy is still growing at over 7%, the kind of rate that the developed world can hardly dare to dream of ever achieving again.

I couldn't quite believe my ears. I had no idea that anyone, anywhere, let alone anyone considered qualified enough to discuss this stuff in public, actually believed the official Chinese statistics anymore.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Let's not forget even the country's own leaders have referred to the GDP numbers at "man-made" and "for reference only." That means that if we want to know how fast GDP is actually growing we have to look at other measures.

In my interview with him in the magazine this week, chemicals expert Paul Hodges refers to two measures he likes property tax revenues, which are collapsing, and car sales, where the general direction of travel can be backed out from the fact that BMW has just had to pay $820m to its Chinese sales network to help cover some of their losses.

Advertisement - Article continues below

Diana Choyleva of Lombard Street Research makes her own adjustments to the official numbers to try and make sense of them ("China's data always throw up challenges", she says). Her results suggest a fairly major slowdown too.

Over the last three years she reckons that growth has averaged about 6% (under half its pre-crisis level) but that by last year it was down to 5% (the official number was 7.4%) and by the fourth quarter had slowed to 3.2%.

She also notes that capital outflows from China are at record highs. That matters: capital flight from any country is pretty much always a "warning signal" that things aren't going well.

So there you go. There is no way that the Chinese economy is currently growing at 7% plus and not much likelihood that it will for some time to come.

Anyone who wants to argue the point on this might like to read my interview with Paul Hodges in the magazine this week (subscribers click here) or to watch it online here.




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
China economy

China’s maturing corporate bond market

Chinese companies are defaulting on their debt in record numbers. And the trouble could spread to state-owned enterprises.
20 Dec 2019

Cracks spread in China's fragile economy

China's annual economic growth is forecast to dip below 6% in the final quarter of this year and continue to fall into 2020 thanks to weaker exports a…
6 Dec 2019
Stock markets

Investors maintain confidence in Hong Kong

The protests in Hong Kong caused the territory to plunge into recession in the third quarter, and has also begun to weigh on local markets. But invest…
21 Nov 2019

Most Popular


Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020

Money Minute Wednesday 15 January: UK inflation and house prices

In today’s Money Minute, we look ahead to the latest UK inflation and house price figures, plus we have Germany’s GDP data for 2019.
15 Jan 2020

Where will markets be in 2030? Here are 20 forecasts for the 2020s

A lot has changed in the last ten years – stockmarkets soared, technology transformed our lives and politics has changed beyond measure. Here, Dominic…
14 Jan 2020

Are UK house prices really on the rebound?

The latest house price data from the Office for National Statistics paint a picture of a housing market that is showing signs of rallying. That's not …
15 Jan 2020