Is Chinese Growth Credible?
I’ve long been skeptical of Chinese growth numbers. I don’t doubt that China’s economy is growing rapidly, but year after year of 10% growth seems incredible. In addition to the generic argument for doubting extreme numbers, we have the long history of Communist regimes falsifying their numbers, and Western observers gullibly taking their lies at face value. Fool me once, shame on you; fool me twice, shame on me, right?
In the latest issue of the Economist, I read a couple other facts that reinforced my skepticism. I don’t claim that they are a smoking gun, but they are certainly weird.
Weird Fact #1: 60% of the Chinese remain in agriculture, where they produced 12% of GDP:
For the past three years rural income per head has risen by more than 6% annually in real terms. In the first half of this year, pushed by fast-rising food prices, it was up 13%, the highest increase since 1995 according to official media…
Rural China is still home to about 60% of the country’s 1.3 billion people, but agriculture’s contribution to GDP has fallen from more than a quarter in 1990 to less than 12% today.
Are there any other major economies that fit this pattern? Can the average non-farm worker really be 11 times as productive as the average farmer? What other countries with a purchasing-power parity per-capita GDP of $7600 are 60% agricultural? (Aside: Could rural workers engaged in non-agricultural pursuits be enough to make these numbers reasonable?)
Weird Fact #2: Chinese consumer spending is only 36% of GDP:
China will soon boast seven of the world’s ten biggest shopping malls. Yet Chinese households are hardly the most eager shoppers. Consumer spending has fallen from 47% of GDP in the early 1990s to only 36% in 2006, the lowest proportion in any large economy… At the other extreme, American households consume 70% of GDP.
Normally rapid growth is a reason to borrow against future earnings; so why do the Chinese appear to be doing the opposite? Perhaps the simplest explanation is that it is much harder to fake high consumption than high GDP.
Any other Chinese growth skeptics out there? What should I be reading?