How Stable Is China’s Growth? Shedding Light on Sparse Data

Policymakers, academics, and market participants have raised many questions in recent years over the accuracy of China’s official economic growth rates, both in terms of levels and volatility. This issue is of considerable importance for policymakers because fluctuations in China’s economic activity can have significant impacts on growth, employment, inflation, and other policy objectives, given China’s large shares of world output, trade, and commodity demand, and its rapidly growing role in global financial markets. This study addresses the question of growth volatility using a set of alternative growth indicators and concludes that China’s official growth rate most likely has been implausibly smooth. Moreover, growth slowdowns during 2014-15 and 2017-19 were about twice as large as officially reported, while a growth rebound in 2016 was scarcely reported at all; the 2017-19 downturn was also shallower than that of 2014-15, by alternative measures. We argue that this picture fits reasonably well with other indicators of the global economy, China’s own domestic data, and policy developments in China. Economic cycles in the period after the global financial crises have shown much shorter upturns and much longer downturns compared with the first decade after China joined the World Trade Organization. These cycles are likely to continue around a substantial slowdown in trend growth.