| The announcement that China's GDP grew by 8.7 percent in 2009 put an end to the question whether China would achieve the 8.0 percent growth target set at the beginning of the year.
The most important discussion regarding the growth target was among Chinese economists and forecasting organisations. However a widespread and intense international debate accompanied it. It is therefore both legitimate and necessary, from the point of view of deciding how much weight to give to analyses in the future, to register clearly who was proved right and who was wrong.
To make a balance sheet of such forecasts is far from a backward looking historical exercise. In most cases there is no firm evidence that those who made wrong projections, and therefore greatly underestimated the strength of China's economy, have corrected the analyses that led to the errors. As the analyses concerned what was in 2009 easily the world's fastest growing economy, these are not minor mistakes but fundamental flaws.
Taking first those who correctly predicted high growth for China, and the success of the stimulus package in achieving this, these included, in addition to the present author, Jim O'Neill, chief economist of Goldman Sachs, Professor Danny Quah of the London School of Economics, Mark Weisbrot of the Centre for Economic and Policy Research, Yan Wang of BCA Research.
Those who made an erroneous analysis included Stephen Roach, chairman of Morgan Stanley Asia, who said last March: "The [Chinese] government's steadfast insistence on hitting its official eight percent GDP growth target for 2009 is simply no longer credible.... it is almost mathematically impossible for China to grow by eight percent growth for the year as a whole. This needs to be recognised and communicated both within and outside of China."
Michael Pettis of Peking University declared that: ''The U.S. would be the first major economy out of the crisis and China one of the last." In fact last year China's economy grew by 8.7 percent while the US economy is likely to have shrunk by 2-3 percent.
Prior to April 23, 2009 Morgan Stanley's prediction for China's 2009 GDP growth was only 5.5 percent. On that date it raised its projection to 7.0 percent – still an underestimate. Goldman Sachs, despite Jim O'Neill's personal positive assessment, initially projected 6.0 percent growth in China, before revising its forecast in April to 8.3 percent. At the start of the year, UBS projected China's growth would be 6.5 percent.
In the first half of 2009, Standard Chartered made a 6.8 percent prediction. In December 2008, Ben Simpfendorfer of the Royal Bank of Scotland projected China's 2009 GDP growth at only 5 percent.
Turning from private to official international bodies, in January 2009 the IMF predicted 6.7 percent growth in China in 2009. In April 2009, by which time China's economy was already accelerating, the IMF revised its forecast downwards to 6.5 percent. In March, the World Bank also lowered its prediction to 6.5 percent. In March 2009 the OECD Secretary-General Angel Gurria said the organization might revise its forecast for China's GDP growth to as low as 6.0 percent.
In addition to these serious, if wrong, views, the habitual catastrophists also put forward their perspectives – and strangely received significant coverage in the international media despite the fact that, as always, their forecasts were entirely disproved. Among them were Gordon Chang, who continued to stand by the thesis of his 2002 book The Coming Collapse of China, which declared: "A half-decade ago the leaders of the People's Republic had real choices. Today they do not. They have no exit. They have run out of time." This prediction was made as China was about to experience seven years of the most rapid economic growth in world history.
Deng Xiaoping liked to quote the dictum "seek truth from facts." This does not apply only in China. If an analysis yields a wrong prediction, it means it is flawed. Analyses that have previously failed to foresee the strength of China's economy cannot, therefore, be considered reliable for present and future projections.
Given the clear outcome of China's stimulus package and the country's economic performance in 2009, when analysts appear in the media this year outlining future prospects for the Chinese economy, the first question they should be asked is "what was your prognosis for China's economic performance in the crisis year 2009?"
"Seek truth from facts" remains a good guide in any country.
The author is a columnist with China.org.cn. For more information please visit:
http://m.keyanhelp.cn/opinion/node_7080931.htm |
