China ‘smoothing’ of economic data is distorting global growth and policy responses, study says
- China’s growth rate varied by only 0.8 percentage points over the last 16 quarters, much lower volatility than any other economy in the world, Rhodium Group says
- This has led to distortions in global economic growth estimates, since projections of economic health hamper the progress of China’s domestic reform
China’s official economic data over the past four years has been “too smooth to be realistic”, given the significant volatility in key industries over the same period, according to a new study by Rhodium Group, a US-based economic research house.
A new report claims that this unrealistic data has led to distortions in global economic growth estimates, which in turn has affected economic policy decision-making throughout the world, with China paying the highest price.
Beijing has always prioritised stability and since the start of the trade war with the United States in July 2018, has chosen policy responses to strengthen employment and investment.
However, while steady growth projections may assuage the ruling Communist Party and the general Chinese public, elsewhere in the world they generate concerns over China’s rise and over the progress of domestic reform, the report says.
“There is significant cost to its data smoothing for China itself, which I think is completely under appreciated, based on the expectation that projecting stability is a significant impediment to reform,” said Logan Wright, head of Rhodium Group’s China markets research.