A New York Times article offered some bold claims regarding Chinese economic growth. It was entitled China on Path to Become Second-Largest Economy. The main evidence offered was that China reported an increase of 10.7% for its Gross National Product during the 4th quarter of 2009. This figure seems suspicious. In a increasingly interdependent and global economy that level of growth seems unlikely amid worldwide economic downturn. Economic growth and increased GDP are of course possible and China's high level of exports would likely contribute to some level of increase.
However, some things about China and it's government should be kept in mind when dealing with these types of reports. The most important being that China is a totalitarian state. In China the government has complete control over and effectively exclusive access to most of the raw data used to formulate economic benchmarks. The Chinese government is notorious for reporting only good news and wanting to show a strong front to the "enemy" west. Additionally the method used by the Chinese government, purchasing power parity, is regarded sceptically by even kind critics. That method tries to take into account lower cost of living but in doing so departs significantly from nominal exchange rates and relative strength of different currencies. In 2003 the World Bank's purchasing power parity calculations put the parity rate at 1.8 Chinese yuan to 1 US dollar. At the time the nominal exchange rate was 7.6 yuan = 1 dollar.
With the assumption that these GDP figures are inaccurate comes the obvious foll0w up question. What is the actual economic growth of China? This also raises a point about the validity of indicators like GDP in general. How much faith should we place in these numbers? GDP does seem to be the most effective and broadest way to generally measure economic growth and activity but since most of the educated world is at least in part influenced in financial decisions by changes in GDP, i.e. an announcement of recession, then shouldn't more focus be placed on evaluating this number and analyzing the underlying data?