When it comes to estimates of China's growth rate, we could go with the local politburo propaganda which even China itself has admitted is goalseeked worthless drivel fit "only for reference", or we could listen to a megacap CEO, who actually is on the ground and whose business model depends on accurately predicting the underlying economic reality of the world's biggest nation. We chose the latter, in which case we now know that China's 2012 GDP growth was only 3-4%, half the reported 7.8%.
Based on indicators such as consumer consumption and electric power usage, China’s gross domestic product probably grew 3 percent to 4 percent last year, Eaton Corp. Chief Executive Officer Sandy Cutler said yesterday in a telephone interview. Growth is accelerating now that China is past the distractions from its leadership change, he said.
“That’s what we and so many multinational companies have been feeling there in China for the last year and a half, the economy really hasn’t been growing at 7 or 8 percent,” Cutler said. “If we could get back to an 8 percent growth rate in China for 2013, that would be a pretty darn good year.”
His skepticism about the data echoes complaints from economists such as Li Wei of Standard Chartered Plc in Shanghai that China had inflated third-quarter growth before the November congress where the ruling Communist Party had its decennial transfer of power. Cutler runs a manufacturer that got more than half its 2012 revenue of $16.3 billion from outside the U.S.
Mark Williams and Qinwei Wang, economists with Capital Economics Ltd. in London, wrote in October that China’s third- quarter economic growth of 7.4 percent was “implausible.” Standard Chartered said in October its analysis indicated the economy expanded 6.5 percent in the quarter.
So yes, China lied... again, and as always... and especially around the time of its Politburo transition in November. As shocking as this news may come to most, we are confident the collective act of sticking heads in the sand shall continue. After all it was only 2007 when the S&P was saying everything was fine.