August 2011 Archives
In 2007, Chinese deputy prime minister Li Keqiang told the American ambassador (whose report would become a famous wikileaked cable in 2010) about his (Li's) misgivings about the quality of provincial GDP figures in China. Instead, Li said, he used three proxy figures for GDP, namely cargo volume on provincial railways, bank loans and electricity consumption. The Economist went on to make a 'Keqiang index' that juxtaposed China's official GDP with Keqiang's proxies. This chart revealed an economic 'just as dynamic but even more volatile').
Yet as Damien Ma points out in The Atlantic earlier this month, the use of electricity consumption as a proxy for GDP has been in vogue in China since the 1990s. And one reason electricity consumption has correlated relatively well with economic growth, he adds,
is because industry is by far the largest consumer of power, at perhaps 70 or 75%. As the last decade has been basically defined by China's hyper industrialization phase, capturing a large enough slice of industries--which are massive energy guzzlers--meant you had a rough, but imprecise, picture of the broader economy.
The chart above juxtaposes not GDP and electricity consumption, but two slightly different indicators, namely industrial value add (hence output for the industrial sector of the economy, including manufacturing, mining, and utilities) and electricity production. The correlation is strong, yet it is striking that electricity production is (as with the Keqiang Index) just as dynamic as industrial value add but even more volatile.