IT ALL seems a little too perfect to be true. The Chinese government set a growth target of “about 7%” this year; the economy, ever responsive to the Communist Party’s needs, has hit exactly that number for two quarters in a row. Cue a chorus of scepticism.
The first quarter did look suspicious. Growth in industrial production was the weakest since the depths of the financial crisis; the property market, a pillar of the economy, crumbled. China reported real growth (ie, after accounting for inflation) of 7% year on year in the first quarter, but nominal growth of just 5.8%. The only way to arrive at the higher real figure was to put the GDP deflator, a measure of inflation, at -1.1%. That implied the economy suffered broad-based deflation, a bizarre claim given that consumer prices rose by more than 1% at the same time. Had the GDP deflator been more accurate, Chang Liu and Mark Williams of Capital Economics reckon, real growth in the first quarter would have been one or two percentage points lower.
The data for the second quarter are more credible. In nominal terms, growth rebounded strongly to 7.1%. The corollary is that the GDP deflator is now 0.1%, a reading that is much more consistent with rising consumer prices and falling producer prices. There were signs of some tampering: without explanation, the national bureau of statistics cut the quarter-...
from The Economist: Finance and economics http://ift.tt/1TF2fne
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