The estimation of China's economic growth rate

Abstract

Many scholars of the Chinese economy have concluded that official estimates of China's GDP growth rate are too high. Journalists have popularized this view, but we disagree. We use a method that examines several strategic indicators that are suggested by basic social accounting principles and conclude that principal components of these indicators reflect the movement of official estimates of the Chinese economy. This conclusion holds whether one uses annual, quarterly or monthly indicators. It cannot be claimed that we have proved that GDP as officially measured is correct. No one knows the correct estimate; that is the whole point of showing how different such estimates can be, depending on how they are calculated, and this is true the world over. Our estimates survive diagnostic tests, within-sample interpolations and outside-sample extrapolations in monthly, quarterly, and annual time frames. It is reasonable to expect that introduction of quality adjustments will justify higher estimates.JEL Classification: C51, C82, O53

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“…19 For details see Jolliffe (1986), Kim andMueller (1979), UNCTAD (2005), and Stockburger (1996). 20 An application of this methodology is provided in Klein and Su¨leyman (2003), Shukla and Kakar (2006), Basu (2002Basu ( , 2007 and Rahman et al (2005). 21 The variation in the error term is caused by the factors that could impact oil vulnerability but have not been considered, such as specific domestic policies of the countries, risks associated with the domestic oil production, and so on.…”

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