China's official numbers mask economic pain
Growth stalled in 4th quarter, analysts report
BEIJING - Government data showing that China's economy is cooling but still growing have obscured what economists say is a sharp and painful recent decline. The effects have included plunging exports, factory closures, and more than 20 million lost jobs.
What is happening matters far beyond China. Whether the third-largest economy is stalling or still growing could affect how quickly the world recovers. A stagnant China would mean less demand for industrial materials and consumer goods from the United States and other countries.
The difference in the public and private views of the economy lies in the way growth is measured. Beijing uses a method that compares growth in one quarter with a full year earlier and says its economy expanded by a healthy 6.8 percent in the final quarter of 2008.
But economists say that compared with the previous three months - the system used by most other major countries - China's growth fell to as low as 1 percent, or possibly zero.
"The recent weakness is much worse than the long-term trend," said JP Morgan economist Frank F.X. Gong. Merrill Lynch economist Ting Lu said fourth-quarter growth from the previous three months was "close to zero."
The lower quarter-on-quarter growth figure would be in line with other indicators that show exports and manufacturing falling and weakness in investment and consumer spending.
The pain is evident in factories that are losing business, and in empty restaurants and shops.
Sales at the Laiwu Sheng Yuan Building Materials Co. have plunged 50 percent from a year earlier, said general manager Wang Jian. He said construction companies are in such bad shape, he is reluctant to fill orders.
"I'm afraid they won't be able to pay," said Wang, whose company in the eastern city of Laiwu has 100 employees. "Builders already owe me more than $29 million, and I don't know when I'm going to get it back."
Other Asian economies such as Japan and South Korea are contracting, which would make Chinese growth of even 1 percent encouraging. Beijing says there are signs its $586 billion stimulus launched in November is taking effect.
A key indicator of manufacturing improved in January, suggesting the slump might be reaching its bottom. But the purchasing managers index of the China Federation of Logistics and Purchasing said manufacturing still contracted.
"Despite the sunny headline figure, we believe it signals not a recovery, but rather continued weakness," according to a report by Stephen Green of the Standard Chartered Bank, which serves China.
Other countries such as the United States and Japan report gross domestic product growth by comparing each quarter with the previous quarter. That requires more number-crunching to adjust for seasonal differences but quickly reveals changes in performance.
China's National Statistics Bureau said it is working to create a reporting system like those of other major countries, but it gave no timetable.
The gap in measurement is well known to private sector economists, who try to estimate China's quarter-on-quarter growth based on skimpy government data. Green said fourth-quarter growth compared with the previous three months fell to 1 percent at an annual pace, down from 4 percent the previous quarter.
JP Morgan gave an estimate of 1.5 percent quarter-on-quarter annualized growth. But its figures also highlight a sharp decline: That rate is just one-tenth of the 15 percent quarter-on-quarter growth of early 2007.
Exporters and China's trade-driven southeast coast have been hit hardest but weakness has spread to other regions and industries such as real estate and auto sales. 