China revises up 2018 GDP after new census, making it easier to double size of economy in 2020

Frank Tang

China announced on Friday that it has revised up its 2018 gross domestic product based on the results of the new national census, making it easier for Beijing to meet its goal of doubling the size of the economy in 2020 from a decade earlier.

The size of 2018 gross domestic product (GDP) was increased 1.9 trillion yuan (US$270 billion), or by 2.1 per cent, to 91.93 trillion yuan (US$13.1 trillion), said the National Bureau of Statistics - roughly equivalent to the entire economy of Vietnam.

The largest contributor to the upwards adjustment was the tertiary sector, which includes the services and other non-agriculture, non-industrial sectors. Census results showed it was about 2 trillion yuan (US$284.3 billion) bigger than original estimates.

Its proportion of total economic output was lifted by 0.9 percentage points to 53.3 per cent. The size of the agriculture sector was revised up slightly, but its share of the total economy was revised down. The industrial sector's size and proportion of total GDP were both revised down.

We know from a few years ago there are things they can do to massage the growth rate

Julian Evans-Pritchard

The statistics bureau did not provide a revised growth rate figure for last year, which was originally reported at 6.6 per cent.

Julian Evans-Pritchard, senior China economist of Capital Economics in Singapore, said that while it remained unclear exactly what impact the GDP revision would have, there was a chance it would make it easier for China to accomplish its 2020 growth target.

“We know from a few years ago there are things they can do to massage the growth rate,” he said.

Based on the original 2018 GDP figure, the world’s second largest economy needs to grow at least 6.1 per cent in 2020 to achieve the goal of achieving a “moderately prosperous society” with GDP and per capita income double the level of 2010. The goal was set by former president Hu Jintao in 2012 and is seen an important benchmark to judging the success of the Chinese Communist Party’s economic management.

A higher GDP base in 2018 suggests that China could grow at a slower rate in 2020 and still meet the target.

Lu Ting, chief China economist at Nomura International, said Friday’s revision could allow Beijing to set a growth target as low as 5.8 per cent for the fourth quarter and 2020, and even lower in 2021.

“However, as we believe Beijing still values growth stability, we think it will only tone down its 2020 growth target slightly to ‘around 6.0 per cent’ from ‘6.0-6.5 per cent’ for 2019,” Lu said in the note.

Zhang Yu, chief macroeconomic analyst with Huachuang Securities, estimated a growth rate of 5.8 per cent would be enough for China to hit its 2020 target.

Next year’s growth rate is widely expected to be below 6 per cent, given growth slipped to 6.0 per cent in the third quarter of this year and is slated to fall further amid a trade war with the United States and domestic headwinds. The International Monetary Fund, for instance, forecast in October that China’s growth could slow to 5.8 per cent next year from this year’s 6.1 per cent rate.

The statistics bureau said the revision was conducted “strictly” according to its GDP calculation rules and noted the size of the change was smaller than previous economic censuses in 2004, 2008 and 2013, which revised up the size of the economy by 16.8 per cent, 4.4 per cent and 3.4 per cent, respectively.

Although the 2018 [GDP] level was increased, it won’t have an obvious impact on economic growth in subsequent years

National Bureau of Statistics

“Although the 2018 [GDP] level was increased, it won’t have an obvious impact on economic growth in subsequent years,” the statistics agency said.

China conducts a census every five years to gain a more detailed picture of its rapidly changing economy. In addition to 2018, the statistics bureau will adjust data for previous years, though the work is not yet completed.

The size of the nation’s economy is widely believed to be under estimated in many areas, due to recent rapid shifts towards digital and service sector-dominated growth. The accuracy of China’s official economic data has been widely questioned by analysts outside of China.

There have been a number of incidents in which local government officials have falsified economic data reporting to increase their chances for promotion.

Beijing announced earlier this month that it would unify the GDP calculation at central government level starting in early 2020 and would collect more data directly from companies to eliminate the possibility of local forgery.

This article China revises up 2018 GDP after new census, making it easier to double size of economy in 2020 first appeared on South China Morning Post

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