Note: This article was provided courtesy of Iris.xyz.
By Andy Rothman
A question that is posed frequently by those skeptical over the health of China’s economy is: “If electricity consumption and rail freight traffic are both weak, how can GDP be expanding by more than 6%?”
This is a great question because the answer highlights the dramatic pace of change in the structure of China’s economy. In today’s Sinology, we explore the reasons why the so-called “Li Keqiang Index” is a poor way to assess China’s growth, and offer some better metrics.
The structure of China’s economy has changed so much over the past decade that we need to change the way we measure its growth. Services and consumption have replaced manufacturing and construction as the largest part of the economy. These shifts have led, for example, to a decline in power consumption, but a sharp rise in express package delivery. In China, as in the U.S., growth is driven by consumer spending, and we have plenty of ways to check the official data.
Apple, for example, reports that its greater China revenue rose 14% in the most recent quarter, and Mercedes sales were up 50% in January. And, it is worth noting that power consumption by the services and consumer-related sectors rose 7.5% in 2015.