China’s Growth May Have Only Clocked 6.3% In First Half, Full Year At 6.6% — Bloomberg Survey

China’s economy may not be expanding as much as we think and slower than its official data may suggest, according to a recent Bloomberg survey, which is helping to explain why policy makers in the nation have stepped up stimulus efforts and devalued the nation’s currency in a move to boost exports via a weaker yuan.

According to the recent survey from Bloomberg, China’s economy only expanded 6.3 percent in the first half of 2015, compared to the officially reported 7 percent growth rate, based on a median estimate of 11 economists whom were surveyed by the news agency last week.

To make matters worse, the survey shows that growth in China for 2015 may only register at a 6.6 percent clip, versus the official “about 7 percent” growth target for 2015 that the government has set forth, which is continuing to increase pressure on authorities to do more to meet Premier Li Keqiang’s target.

The survey results of the full year estimate were based on the median forecast of respondents, whom were asked to nominate real growth rates, versus what they actually expect the official data to show. However, these economists polled estimate that the economy’s potential expansion expansion for 2015 is at 7 percent.

Bloomberg notes that the gap between the potential and estimated real rate of expansion highlights a cyclical slowdown that the government is trying to plug with looser monetary policy, increased fiscal support, and a weaker currency.  Furthermore, Bloomberg’s monthly gross domestic product (GDP) tracker has pegged China’s growth below 7 percent all year, clocking a 6.6 percent pace in July.

“The actions of the government and central bank so far this year do indicate a certain amount of concern over economic growth,” Patrick Franke, an economist at German savings bank Helaba, told Bloomberg. “That would be easier to understand if they were aware that underlying/true growth was actually below, and not in line with, the 7 percent target.”

The recent flurry of measures to prop up growth in part are “extra insurance against an unwanted downshift in demand growth” he said, adding that signs indicate that growth is lower than officially stated.

China’s economic growth in the first quarter (Q1) of 2015 reached the slowest quarterly pace in six years at 7 percent from a year earlier, this was followed by the same growth rate in the second quarter (Q2) which beat economists’ estimates for 6.8 percent growth.

Growth has suffered in China due to a combination of an industrial slowdown, a weak housing market, and mounting local debt.

In addition, as we have reported before, a growing number of economists and investment firms are doubting the validity of the growth figures that are being released from Beijing, and suspect that growth figures are much further lower.

For example, Oxford Economics believes that China’s economic growth is actually running at a pace closer to 4 to 5 percent.

Chart courtesy of Oxford Economics

Capital Economics believes that China’s GDP growth is being overstated by 1 to 2 percentage points due to a glitch in the way it is being calculated.

The basis of the analysis by Capital Economics is focused on the “GDP deflator”, which is the inflation measure that is used to convert estimates of nominal GDP into real, inflation-adjusted terms.

According to the estimates from Capital Economics, China’s economy had only grown by 5 to 6 percent in the 12 months to the first quarter (Q1) of 2015, however Capital Economic’s says that the lower rate was closer to their own estimate — based on activity data — of 4.9 percent.

Chart courtesy of Capital Economics

But wait, China’s GDP growth could be even worse than what Oxford and Capital Economics are estimating: Lombard Street Research believes that China’s true economic growth rate is 3.8 percent and The Conference Board is estimating 4 percent.

The IMF and Moody’s Investors Service both estimate that China’s growth rate to register at 6.8 percent in 2015, down from 7.4 percent last year.

A full-year growth rate of 7 percent would be its slowest annual rate of expansion in 25 years.