Multiple reports of China’s lowest GDP growth in almost 30 years have recently pervaded the general and economic media. Dramatic headlines that imply that China is in some sort of economic down-spiral.are all over Google.
Let’s look at how the facts are reported. First of all the lowest recent China GDP growth was in 1990 at 3.9%; at present the GDP growth rate is 6.6% and has been gradually declining from 7.0% for about five years. So, yes, in percentage terms China’s growth is slowing but percentages are based on underlying figures or the actual size of the economy which also needs considering.
During the period 1990 – 2017 the highest annual GDP growth in China was in 1992 and 2007 at 14.2%.
Look at these comparisons:
In 1992 the size of the Chinese economy was US$493.14 billion so at a growth rate of 14.2% it would increase by (493.12 x 14,2%) US$70.02 billion.
In 2007 the size of the Chinese economy was US$3,553.82 billion so at a growth rate of 14.2% it would increase by (3,553.82 x 14,2%) US$504.64 billion.
In 2017 the size of the Chinese economy was US$12,250.39 billion so at a growth rate of just 6.9% it would increase by (12,250.39 x 6.9%) US$845.27 billion.
Conclusion – it is growth in US dollar terms that defines whether an economy is really slowing down in absolute growth terms. Percentages give an immediate and in this case erroneous impression is headlined in the media. Why not report China’s latest GDP results as follows:
“China’s economy grew 12 times faster than 30 years ago as it continues accelerating”
This is using the same numbers available to everyone but expressed in absolute US dollar growth rather than abstract percentages.
Perhaps economic media needs to reconsider its reporting practices especially when it comes down to China whose growth even at 6.9% is still the envy of the world’s major economies.
To put it bluntly – there is no “slowdown” in China’s GDP but sustained growth in US dollar terms and increasing consumer purchasing power.
The attached chart from the IMF sums it all up.
Statistics Source: https://en.wikipedia.org/wiki/Historical_GDP_of_China