Even the Chinese premier doesn't trust his country's GDP figures. Li Keqiang reportedly told a US ambassador this in 2007. He described Chinese GDP figures as 'man-made' and unreliable. Wikileaks then made the diplomatic report public a few years later. This anecdote has been much reported this week due to the latest gloomy economic figures from China. Its economy officially grew by 6.9% in 2015, its slowest rate in 25 years.
So what can a jittery world trust? Keqiang was reported to focus on three data samples to compensate for an unreliable GDP: electricity consumption, rail cargo volume and bank lending. Global Cement Magazine suggests that he should have followed one more: cement. What can cement tell us about the Chinese economy in recent years?
Chinese cement production fell by 4.9% to 2.35Bt/yr in 2015 according to newly published figures by the National Bureau of Statistics of China (NBSC). This is significant. Firstly, whether it is a true reflection of actual production or not, it is an admission by a Chinese state body that cement production is declining. Secondly, it signals the end of the rapid growth of the country's heavy industries through the 1990s and 2000s.
Figure 1 – Chinese cement production by quarter, 2014 – 2015
Figure 1 shows Chinese cement production by quarter in 2014 and 2015 using NBSC data. Two years are insufficient to pick out any major trends other than seasonal trends throughout each year. However, remove the slow winter months in the first quarter of each year and a steady decrease in production throughout 2014 and 2015 is apparent.
Figure 2 – Chinese cement production by year, 2005 – 2015
Figure 2 offers the context that Figure 1 lacked by comparing cement production from 2005 to 2015. Notable trends to point out are a slow down in growth in 2008, around the time of the global financial crash. Then production peaked in 2014 before falling in 2015. This data comes from the United States Geological Survey and then latterly the NBSC.
Figure 3 – Chinese cement production by year and GDP/capita, 2005 – 2015
Figure 3 shows annual growth in cement production against growth in GDP. The similarity of each line here, or the rate of growth, and where they diverge is what is interesting here. Up until the late 2000s the trend is similar until GDP/capita starts to grow faster than cement production. At this point either the Chinese economy has started to acknowledge that it can build all the infrastructure and housing it needs or perhaps the slowing growth in cement production has started to point to slowing GDP/capita growth.
2015 could be a blip if growth resumes in 2016. Yet the other heavy industry metrics suggest otherwise. Electric power and steel production also fell for the first time in 2015. Coal production dropped for the second year in a row. The Chinese housing market started to slow noticeably in 2014, cement production followed by slowing down and now the country's GDP growth has also slowed. Alongside this the industry's capacity reduction programme officially started in late 2013. Cement consumption per capita for China has long suggested that Chinese growth was due to slow. It is reassuring to finally see the official production figures reflect this. The real question though is what happens next.