In the latest iteration of its widely used estimates of global growth and productivity, the Conference Board (CB) has adopted an alternative computation of China’s GDP as its base case. We are unaware of any other reputable agency adopting anything other than official numbers as a base case, although clearly there has always been a lot of scenario analysis.
CB has now adopted estimates by Professor Wu and the late Professor Maddison. What is the difference between the official and Wu-Maddison estimates? Over the last decade, China has been gradually moving from the Soviet system of collecting information as an output model (measuring production by sectors with information flowing from local officials up the chain) and towards the internationally recognised system of national accounts (SNA), which relies not on internal reporting but rather on sophisticated statistical surveys of consumer spending and investment. Whilst China’s systems have been gradually changing, the transition is far from complete and China continues to operate on a version of output system.
… showing more volatile growth and sharp decline in TFP
What do Wu-Maddison numbers show? First, unlike official numbers and economists’ estimates, which tend to argue about minutia of decimal points (should the growth be 6.3% or 6.5%?), Wu-Maddison estimates show a much higher degree of volatility than is evident in official numbers. This makes more sense vs (say) flat 10-11% retail sales that have been officially reported every month for two years. Second, there have been periods when Wu estimates have shown GDP growth rates to be faster than officially reported. But in the last five years (’11-‘15), the average GDP growth rate was estimated at ~4% (3.7% in ‘15) vs the official rate of 7.7%. Third, China’s productivity (TFP) growth rates were revised drastically down from an average of 2.5% to only 0.2% (’90-15) and TFP turned negative in the last five years (-2.4%).
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
In the latest iteration of its widely used estimates of global growth and productivity, the Conference Board (CB) has adopted an alternative computation of China’s GDP as its base case. We are unaware of any other reputable agency adopting anything other than official numbers as a base case, although clearly there has always been a lot of scenario analysis.
What do Wu-Maddison numbers show? First, unlike official numbers and economists’ estimates, which tend to argue about minutia of decimal points (should the growth be 6.3% or 6.5%?), Wu-Maddison estimates show a much higher degree of volatility than is evident in official numbers. This makes more sense vs (say) flat 10-11% retail sales that have been officially reported every month for two years. Second, there have been periods when Wu estimates have shown GDP growth rates to be faster than officially reported. But in the last five years (’11-‘15), the average GDP growth rate was estimated at ~4% (3.7% in ‘15) vs the official rate of 7.7%. Third, China’s productivity (TFP) growth rates were revised drastically down from an average of 2.5% to only 0.2% (’90-15) and TFP turned negative in the last five years (-2.4%).
