How fast is China really growing? - the WTO column
 
(Next week at Chinabiz)

This week the National Bureau of Statistics announced that China’s economy has been growing 9.7 percent in the first half of 2005, well ahead of the official target of 7 percent.
How close is this figure matching the reality? Last year we all had a good time when one of our friends discovered that all the provincial averages for their economic growth were well ahead of the national average, a feature that flabbergasted all my statistically more versed friends, but did not really amaze me. Those statistical realities are always constructed, mostly for political reasons and motives for their magnitude are different on a central level and on a provincial level, where bonuses of officials often depend on the imaginary economic growth they can fabricate.
 
How much of the economic reality is really captured by that figure? I hope some of my statistical friends can put me straight, but according to my observations on the ground much of the economic growth does escape from the attention of the official bean counters. For reasons of convenience I always say that the informal economy, next to the official one, is at least of the same size, but that is only because any other percentage would be harder to calculate and aas unreliable as my assessment.
When you sit down with people and ask how their income is structured, you see some features that are really different from developed countries. I’m now working on a new project that is going to measure wages in China and very often I have to explain to people that it will be profoundly different from measuring income.
People tend to earn more than only their official wages. Bonuses, housing allowances and cars are seen as non-wage related perks people do not see as an extension of their income. Paying tax over it would most certainly be a possibility that would not be considered. It is very different from what I remember from the tax system in the Netherlands, where a corporate lease car would be considered to be part of your income.
 
Some of my friends who work in less organized part of China, outside Shanghai, laugh when I give visiting delegations of business people my assessment of the income in China. They work in other industries and regions where they think 90 percent of China’s economy is not accounted for and that China is actually doing much better than even the official figures suggest. Look at places like Wenzhou that are economies by themselves, without much relation to the official economy.
 
As long as people buy a Buick so their trunk is large enough to transport there cash for their new villa to their real estate agent, it is very hard to come up with solid prediction on how the market is going to work. Looking at general figures that try to paint a general picture of a non-existing general situation is not very helpful. The size of the trunk explains probably better why GM has for the first time sold more sedans than Volkswagen.
 
Fons Tuinstra