Some questions on China’s 20 trillion yuan economy
Preliminary calculations showed that China’s Gross Domestic Product (GDP) topped 20 trillion yuan last year, 10.5 percent higher than the previous year, said Ma Kai, director of the National Development and Reform Commission…
China’s 10% GDP growth is an expected story, but in its way it is most peculiar. China cooked its books regarding GDP last year, revaluing its GDP up 17% all of a sudden, and something funny appears to be going on once again.
At a yuan / dollar exchange rate of 7.8, China’s 20 trillion yuan GDP translates to $2.6 trillion. China’s revised, dollar-denominated GDP last year was $2.26 trillion, and about $1.9 trillion. Using $2.6 trillion and $1.9 trillion (revised) in 2004. to calculate China’s GDP growth, China’s GDP grew 35% from 2004 to 2006, and grew 10.5% from 2005 to 2006.
In our opinion, any economy of China’s size and stage of development that has (a) such flexible GDP numbers, and (b) a trillion dollars or more in bad loans, is likely to fall very hard when it stumbles. One of the real miracles of China’s economic growth is that it has been spectacularly successful in putting off any day of reckoning.