Should we all have laugh about Chinese's GDP ? [PART2]

Firstly, there is a problem associated with measuring GDP in China.  The figure needs fair correction after official statistic being reported. This happens because regional governments in China deliberately misreport the figures and tends to happen every year. In my opinion, the regions put better words on regional performance and make competitive figures in investment, government expenditure, net export and consumptions so that best figures can be report to People’s Bank of China. Better regional government official report the number, better chance to get promotion for the officials. Thus, political factor heavily plays critical role in constructing economic indicators by manipulating figures unrealistically for better individual gains. Subsequently, it is important to press China to report real statistical figures other than falsified ones. 

When the country reports their GDP, they announce target growth rate and real growth rate. Nevertheless, People’s Bank of China solely reports target growth rate and has never been really announced real growth rate. The reason I emphasize of this fundamental problem is real growth is a better indicator of how much of the wealth of the economy has been created and distributed, which would eventually have a great impact on correcting and deciding economic policies. Some economists associate GDP with currency appreciation/revaluation or with Consumer Price Index (CPI) to have a comprehensive picture of what Chinese’s GDP is really about. I think that it’s necessary to respect ‘the Chinese’s way’ – This is because we do not have full picture of domestic political, economic, social and technological aspect of Chinese economy. Global economy depends on China, not vice versa.

Also, for better measurement of Chinese GDP, CPI and M2 should be taken into account in generating final conclusive figure of GDP. When, these two factors are taken into account, surprisingly, China had generated negative economic wealth during 2006 and 2011. How so?  GDP growth in Q1 2011 was measured at 9.6 %. Here, we subtract 5.4% of CPI and real growth comes at 4.2 %. If we take into account of money supply (M2), money supply is increased to 15.9% and was 6.3% higher than GDP. In market, it takes time for M2 to have a direct impact on CPI. In other world, labor participation in the economy has distributed the equal wealth rather than creating positive economic wealth so that overall wealth of individuals in population would benefit from this astonishing economic growth of China.

At last, Chinese’s economy should feel proud of their economic development. Yet, I strongly urge China to maintain high level of integrity and be more cooperative with global leaders. There is nothing wrong about being honest and it doesn’t harm anybody!