Directly following up on my last post about the problems of goals gone wild, here’s a look at China’s attempts to keep up their 8% rate of annual GDP growth. (Thanks to Francois in the previous post’s comments for bringing up the abuse of information during China’s Cultural Revolution.)
Earlier today, FP Passport reported the World Bank’s quarterly update on China predicts 6.5% growth – which just about every other country in the world would be envious of (seems like any growth is like a fantasy most places) but for a tremendously growth-driven economy like China’s (or Dubai’s — or any advancing economy’s), where new construction etc is such a substantial element of the economy, slower growth is like taking a step back in some ways. Btw, year-over-year GDP growth in China was 12.6% in Q2 2007.
The post has disappeared, and I can’t find the World Bank update where the 6.5% figure apparently came from — so I’m not going to put any weight on that — but there was a link to an interesting article in Foreign Policy on that goal of 8% growth.
At the 12th Party Congress in September 1982, Deng determined that the national economic goal would be to quadruple the annual industrial and agricultural output of the entire country by the end of the century. Prior to the big meeting, Deng asked then General Secretary Hu Yaobang how the country could quadruple its economy from 710 billion yuan in 1980 to 2,800 billion yuan in 2000, and Hu responded that 8 percent annual growth would do the trick. That’s it. There’s no complicated secret formula, no hallowed equation precisely linking growth to employment, no connection to the revered words of Confucius, Mencius, or Lao-tzu. Back in 1982, it was determined that it would take 8 percent annual growth to quadruple the economy by 2000.
The end of the century has come and gone, but the target has remained the same. Subsequent five-year plans have all set an annual growth target between 7.5 and 8.5 percent. This national objective has since become the obsession of officials at each level of the government’s vast bureaucracy.
But goals and consistency are good, right?
The truth is, it’s hard to tell exactly what China’s annual growth rate actually is. Because officials receive promotions based on how well they tend their economic gardens, there’s a strong incentive for mandarins at all levels to fudge the numbers they report up the bureaucratic food chain. Each year, county officials are instructed to tally their economic growth figures and report them to the next level, which then reports to the provincial government, which reports to Beijing. Invariably, almost every province reports economic growth exceeding the national average — which, of course, is impossible. As Jim Mann, the noted author and former China correspondent, once pointed out: “It is like Lake Wobegon. All the children are beautiful and above average.”
Reminds me of CNBC.
