China's Economy Larger Than Thought
STEVE INSKEEP, host:
There's been a great leap forward for accounting in China. Seems that China's economy is even bigger than anybody thought. By switching to a better counting method, the Chinese have discovered 300 billion missing dollars in their economy. NPR's Adam Davidson found out what that means.
ADAM DAVIDSON reporting:
It turns out it's not that hard to lose track of $300 billion, at least not for China, where about 900 million people still live on farms or remote villages.
Mr. CARL WEINBERG (High Frequency Economics): Out of the city, out of the banking system, not necessarily using money or credit cards or checks for their transactions, it's not at all surprising that a big chunk of their activity might be missed by statistical sampling techniques.
DAVIDSON: Carl Weinberg, with High Frequency Economics, says China is still trying to modernize an accounting system first developed in the Soviet era. The new techniques, revealed this week, are a huge step forward in allowing bureaucrats to keep track of the ever-growing private sector. China will release the first revised economic data next week. Many expect China's economy will be about 20 percent larger than previously thought. Nick Lardy is a China specialist at the Institute for International Economics. He says that over the past decade, China's accounting practices have become much more sophisticated.
Mr. NICK LARDY (Institute for International Economics): You know, on a scale of one to 10, if the US is 10, you know, China's probably a seven or eight. Technically, this is difficult, and it's a pretty massive effort when you're talking about one of the largest economies in the world.
DAVIDSON: The old data showed that China's economy has been growing at nearly 10 percent a year for the past decade. Some have called this growth `the China miracle.' The new data might confirm that number, or reveal that China has been growing even faster than that, something that might alarm Americans who fear China's growing economic strength. On the other hand, the new data seems likely to show that Chinese consumers are spending more. This should be welcome news to US manufacturers hoping to sell products in China. Manufacturers need good news, especially now, the same week that the US trade deficit with China reached a record high.
Adam Davidson, NPR News.