China’s Economy Confounds Planners

2006-05-01
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China's premier Wen Jiabao (left) and president Hu Jintao. Photos: AFP

China’s soaring economy has confounded government planners and statisticians as officials issue conflicting reports on the country’s growth rate from day to day.

On April 16, ahead of his U.S. visit, President Hu Jintao announced that China’s gross domestic product (GDP) growth hit 10.2 percent in the first quarter of this year.

Premier Wen Jiabao had forecast more moderate growth of 8 percent for the year during his address to the National People’s Congress just one month earlier.

In interviews with Radio Free Asia, economists and political scientists cited inaccuracies in Chinese statistical reporting, as well as problems in managing the country’s economy.

Gary Hufbauer, a senior fellow at the Washington-based Institute for International Economics, called the latest numbers “quite startling,” but he added that Hu may be using his report of faster growth to push his own policies for correcting the economy.

“I think the reason Hu is putting a stronger face on the numbers, apart from any internal chaos in generating the numbers, is that he wants to build the case within the leadership to shift demand away from the export sector.”

China also suffers from a “surprising amount of confusion” in its statistical reporting, Hufbauer said.

Harvard University economist Dale Jorgenson agreed, saying, “The official statistical system, like everything else in China, is improving at a very rapid rate but from a tremendously low base.”

Some of China’s provinces set higher growth targets and report higher figures than those of the central government, Jorgenson said.

Jorgenson cited estimates by independent economists that China has been growing at a slower rate than the government has claimed for years, and that it may actually be slowing further.

“I think that you’ll find that 7.5 [percent] would be a pretty good estimate of what they’ve managed to achieve over the past decade rather than the numbers north of 9 percent that they’ve announced officially on different occasions,” Jorgenson said.

Adding that it’s “perfectly normal” for China’s economy to be slowing, Jorgenson said, “You wouldn’t expect a country with the second-largest economy in the world to be growing at double-digit rates.”

Lowell Dittmer, a professor of political science at the University of California at Berkeley, said that Hu Jintao now has “his hands full” with controlling China’s economy.

Dittmer added that China’s higher reported growth figures, if accurate, suggest either that government policies to slow China’s economy haven’t been implemented or haven’t begun to take effect.

“They’ve announced a lot of new programs, they know what’s wrong, but they have trouble fixing it. The instrumentalities—the tools that they have at the center to correct the direction in which the economy’s moving—just don’t seem to be registering very much yet.”

Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.

Original reporting in Chinese

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