China's Li Doesn't Believe His Own Numbersby
China's Premier Li Keqiang isn't the sort of man to blush in public. But yesterday, when he went in front of China's national legislature and targeted 7.5% growth in gross domestic product for 2014, he should have. The problem isn't the number -- most economists agree that 7.5% is a manageable if difficult goal. Rather, the issue is that Li Keqiang himself doesn't believe in the accuracy of Chinese GDP statistics.
That, at least, is what he told then-U.S. ambassador to China Clark Randt over dinner on Mar. 12, 2007. At the time, Li was the Secretary General of Liaoning Province, and widely viewed as a potential successor to Chinese President Hu Jintao. According to a Mar. 15, 2007, declassified U.S. diplomatic cable (released by Wikileaks) recounting the dinner, a "smiling" Li declared that Chinese GDP figures were "man-made" and therefore unreliable -- "for reference only."
Of course, only the most naïve economist would believe that a country as large and unruly as modern China could produce accurate GDP figures. Li told Randt that he preferred three different measures for evaluating his province's economy, all of which were harder to fudge: electricity consumption, volume of rail cargo, and loan disbursements. "By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth," the cable reported. Not long after the cable was released, the Economist -- in tribute to Li's candor -- created the Keqiang Index, revealing a far more volatile Chinese economy than official GDP numbers suggested.
Although even China's state-owned media is now referring to "GDP worship" as a national economic religion with increasingly negative consequences, there's no way that Li could have repeated what Bloomberg View's William Pesek last week suggested he tell the National People's Congress: "The Chinese government will do all in our power to maintain gross domestic product growth, but from now on, we will do so without the pressure to meet some arbitrary GDP figure."
Still, there was a hint that the candid Li Keqiang of 2007 had some role in writing up the Work Report that he delivered on Wednesday. The evidence is a brief passage in which he describes progress made in "adjusting the economic structure." Briefly, two of his three favorite economic indicators, as revealed to Clark Randt, appear: "China's total electricity consumption increased by 7.5%, and the volume of freight transport rose by 9.9%." Notably, Li shared no data on the third indicator -- loan disbursements. But that, perhaps, is no great surprise at a time when the Chinese government is struggling to control credit supply and the growth of bad bank loans. Some data might be a little too reliable for even this privately candid premier to share.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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