Is China’s 6.9% GDP Growth In 2015 For Real? Skepticism Growing

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Written by Dana Sanchez

There’s no shortage of skeptics about China’s 6.9 percent 2015 GDP growth announced this week, with most commentators believing that figure is closer to 3 or 4 percent, according to JournalOfCommerce, a U.S. trade journal for global container and shipping news.

China’s economic indicators have long created suspicion and are difficult to verify, JOC reported.

“Chinese statistics are really used to project some sort of perception. We know their statistics are not very accurate,” Andy Xie, an independent economist, told CNBC‘s Squawk Box before the data were released. “The economy is not growing much, possibly not in recession, but certainly not growing at 6-to-7 percent.”

Chinese housing starts were down about 14 percent in 2015, “so half of the economy is actually negative,” Xie said.

Chinese power generation fell 0.2 percent in 2015 compared to 2014 —  the first annual decline since 1968 during the Cultural Revolution, Reuters reported.

China’s statistics bureau says the economy is restructuring away from industry and toward services, according to NPR.

China customs data show African exports to China fell by almost 40 percent in 2015, according to U.K.-based ship broker Braemar. In its weekly container briefing, the ship broker said China was Africa’s single largest trading partner and its demand for African commodities had fueled the continent’s recent economic growth, JOC reported.

Others believe the data indicate growth, such as Jahangir Aziz, head of emerging Asia economic research at JPMorgan.

Chinese retail sales, for example, rose 11.1 percent on-year in December.

“If you look at the other services sectors — healthcare, education, financial services —  areas within China … are growing,” Aziz said. “I think people aren’t taking the new China seriously.”

Even at 4.5 percent growth, that still would be among the world’s strongest, said Julian Evans-Pritchard of Capital Economics in a report in TheIndependent.

Chinese online commerce grew by 33.3 percent over 2014.

Forecasters expect economic growth to decline further in 2016, with the International Monetary Fund targeting a 6.3 percent expansion.

China’s 6.9 percent growth in 2015 — real or not — caused major concern for investors around the world. The  country’s full-year 2015 growth was the lowest since sanctions were imposed on Beijing following its crackdown on the Tiananmen Square pro-democracy movement. That caused China’s growth to drop to 3.8 percent in 1990.

As growth slows, what are the political implications for China’s communist government?

Here’s what NPR commentator Frank Langfitt said about that:

“I think the government is concerned. There hasn’t been a lot of publicity on this, but this is something that people should watch for in the coming months. We saw at the end of (2015) a big spike in worker protests and strikes, and this was as the stock market tanked and manufacturing and construction were slumping. And we saw that labor protests actually doubled to 2,700. Cops were called in on 800 of those cases, more than 800. This was mostly over unpaid wages. And the party’s generally handled labor unrest very well over the years. But if growth keeps slowing, that could get harder. And also keep in mind that China’s Communist Party, their claim-to-rule is really built on the management of the economy. They’re not elected. And the management now is looking a little shaky, and I think the last thing the party wants to see is lots of people in the streets criticizing the party and questioning their authority.”

Still, Chinese retail sales, e-commerce and wages all show brisk growth, according to another NPR report.

In China, per capita disposable income grew in 2015 at nearly 9 percent to 21,966 yuan — around $3,341 U.S. — a gain of 7.4 percent after accounting for price changes, the statistics bureau said.

Whether you believe the numbers or not, the next five years will be key to breaking through the middle income barrier to gain advanced country status, which means reaching a per capita income of more than $13,000, CBX Software said in its latest Retail Sourcing Report, according to JOC.

“Annual growth of 6.9 percent would be welcomed by many nations — but in China’s case, it’s seen as another sign that the world’s second-largest economy is struggling to cope with debt levels at the same time that it’s looking for new growth,” JOC reported. “Chinese leaders recognize publicly that its economy is entering a new normal phase of slower growth. As traditional advantages of cheap labor and intensive resource inputs weaken, new growth drivers are needed.”