## 2009-07-29

### arithmetic on Chinese GDP growth

Often we are perplexed by the China export growth number, and its GDP growth. While these statistics have their faults, the trends are indicative. But how do we reconcile between the various data? Are they at least internally consistent? Here is a good exercise.

From the Big picture

A guest author did some 'simple math' and concluded that Chinese non-export economy grew an incredulous 23% in June
• Here is what we know: exports constitute about 35% of the Chinese economy and they dropped over 20% in June, while the Chinese economy (GDP) grew 8%. So the “X” is the growth rate of 65% of Chinese non-export economy.

0.35 x (-20%) + 0.65 x (X%) = 8%. If you were to solve for X you get 23%.

Sounds good for amateurs who use GDP a lot without really knowing the GDP definition like us. A commentator slamian weighed in:
• GDP = C + I + G + NET EXPORT
• And NET EXPORT = Export minus Import
• While the June export went down by 21.2%, the import also dropped by 13.2%.
• 2009 June NET EXPORT = 95.41 – 87. 16 = \$7.98 b
2008 June NET EXPORT = 95.41 / (1-0.214) – 87.16 / (1-0.132) = \$20.63 b
• Therefore the decrease in NET EXPORT should be (7.98 – 20.63)/20.63 = - 60%!

• NET EXPORT as a proportion of EXPORT 2009 = 7.98 / 95.41 = 8.36%
Assuming the 35% quoted is correct, NET EXPORT as proportion of GDP = 35%*8.36% = 2.93%, say 3%
Therefore (C+I+G) is growing at (8% + 3%*60%) / 97% = 10%