China released its economic growth data earlier this month, just two weeks after the second quarter ended and directly in line with expectations: 7.6%. The number was high enough to give the impression that a hard landing was not on the cards.
This marks the sixth consecutive quarter of slowing growth, down from 7.7% in the first quarter of this year and from 8.1% a year ago. Even so, this fits with a government narrative that says the slowdown in the world’s second-biggest economy is stabilising ahead of a recovery in the third or fourth quarter. But the figure also drew its fair share of scepticism.
Analysts at Barclays and Mizuho questioned the data, drawing attention to contradictory trends in industrial production and electricity consumption, which they said revealed a sharper deceleration in economic activity than the official GDP number. Perhaps around 7% or slightly higher.
We asked readers last week what they made of the data in our online poll. Few respondents were willing to say the numbers were accurate and more than two-thirds reckoned that even Chinese officials don’t really know how fast the economy is growing. Slightly more said that the numbers were “directionally accurate”, which is to say that they give no more than a general idea, while a minority claimed the numbers were significantly inflated.
China’s industrial engine certainly seems to be slowing rapidly. Power consumption in June was unchanged from a year earlier; while industrial production reportedly grew by 9.5%, down from 15.1% in June 2011. Meanwhile, the price of steel futures in China fell 3.6% last week, and a further 2% yesterday, as demand continues to remain weak and a massive oversupply hangs over the market.
However, these indicators are hardly bulletproof. All markets in China are distorted, not necessarily by deliberate manipulation, but by the government's dominant role in the economy. To confuse matters further, nobody really knows the size of the informal economy. In today's China, there are even black-market power suppliers.
The truth is probably that "directionally accurate" is the best anyone can claim.