China revises 2018 GDP up 2.1%, says will not significantly impact 2019 growth calculation

Beijing

CHINA on Friday revised up its nominal 2018 gross domestic product (GDP) by 2.1 per cent to 91.93 trillion yuan (S$17.8 trillion), keeping it on track to achieving its goal of doubling the size of its economy by 2020 from 2010.

The revisions showed that the services sector contributed more to GDP in 2018 than the original data had indicated, the National Bureau of Statistics (NBS) said in a statement.

The change in the size of 2018 GDP will not significantly influence the calculation for the 2019 growth rate, the bureau said.

The world's second-biggest economy is growing at its slowest pace in almost three decades, pressured in part by a trade war with the United States.

China routinely revises its annual GDP data. Days before GDP data for 2018 was released in January, the statistics bureau cut its final 2017 growth figure to 6.8 per cent from 6.9 per cent.

China's fourth National Economic Census, released on Wednesday, included "richer" data points that showed more business entities and a bigger total asset base in 2018 than assumed under earlier GDP estimates, Li Xiaochao, deputy head of the statistics bureau, said earlier this week.

Revisions to historical GDP figures will also be made, Mr Li told reporters.

Nominal GDP includes changes in prices due to inflation, so it is usually higher than adjusted, or real GDP.

Growth of about 6.2 per cent is seen needed for the whole of this year and the next to meet the Communist Party's longstanding goal of doubling GDP and incomes in the decade to 2020.

"(Despite) NBS stressing that the current round of revisions is the result of the census uncovering previously unrecorded activity, it's hard to ignore the fact that it will also help them meet official growth targets," said Julian Evans-Pritchard, senior China economist at Capital Economics.

In previous revisions real growth has almost always been revised upwards, he noted.

Analysts say that without further information from the NBS, it's hard to calculate the impact of the latest adjustments on 2018's real GDP or the GDP growth rate for that year.

But a rough estimate of an adjusted real GDP growth in 2018 might be 8.9 per cent, compared to an original reading of 6.6 per cent, said Chaoping Zhu, global market strategist at JP Morgan Asset Management.

The government's target range for 2019 growth is 6 per cent-6.5 per cent. The economy expanded 6.4 per cent in the first quarter, 6.2 per cent in the second and 6 per cent in the third - the weakest pace since 1992.

If the 2018 figure is revised up, the government might be more tolerant of an economic slowdown next year and set a lower growth goal in 2020, said Mr Zhu.

As the deadline for doubling the size of the economy draws nearer, it's become increasingly clear that the target was "too ambitious", said Mr Evans-Pritchard. "Our research suggests that political pressure to meet growth targets has encouraged the NBS to massage the GDP deflator in recent years."

The GDP deflator is the ratio of nominal to real GDP.

Louis Kuijs, head of Asia economics at Oxford Economics, said he would not discount the possibility of the NBS massaging the data.

However, an upward revision by the NBS is neither surprising nor unreasonable, he added, noting that newly included sectors in statistical coverage tend to grow quickly.

"Also, outside of China, revisions of the size of economies are almost always upwards," he pointed out.

A paper published by the US-based Brookings Institution earlier this year said China had overestimated nominal and real growth rates by about two percentage points between 2008 and 2016.

Meanwhile, Chinese President Xi Jinping said his nation wants to work towards a "phase one" trade agreement with the US on the "basis of mutual respect and equality", his first comments on a partial deal that he could potentially sign with US President Donald Trump.

"We did not initiate this trade war and this is not something we want," Mr Xi reiterated in a Friday meeting with prominent international visitors to Beijing including former US secretary of state Henry Kissinger. "When necessary, we will fight back, but we have been working actively to try not to have a trade war."

The comments come a few days after Mr Trump said China was not "stepping up to the level that I want" in the negotiations, as doubts have emerged about whether the two sides can hammer out a written agreement.

On Wednesday, China's chief trade negotiator Liu He indicated he was "cautiously optimistic" about reaching the first phase of a deal.

Mr Liu made the comments in a speech in Beijing on Wednesday ahead of the Bloomberg New Economy Forum.

Mr Xi also repeated the official line that China doesn't want a trade war, but is "not afraid" to fight one. The Chinese leader spoke to more than a dozen people including former US government officials such as Hank Paulson and Gary Cohn.

Since Mr Trump announced the phase one deal a month ago, markets have been whipsawed by comments from both sides, first indicating progress, and then the opposite.

The latest potential hurdle came after Mr Liu made his comments, when the US House voted 417-1 for legislation supporting Hong Kong protesters that has already been unanimously approved by the Senate. REUTERS, BLOOMBERG