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Wednesday, January 21, 2009

China: GDP Increased at 6.8% YOY in Q4

by Calculated Risk on 1/21/2009 09:39:00 PM

From Bloomberg: China GDP Grew 6.8% in Fourth Quarter, Slowest Pace in 7 Years

China’s economy expanded 6.8 percent in the fourth quarter, the slowest pace in seven years, dragging down growth across Asia and increasing pressure for more stimulus measures as exports plunge.
Plummeting Chinese demand for parts and materials for exports is reverberating across Asia and the Pacific, driving Taiwan, South Korea and Australia closer to recessions and worsening Japan’s slump. Premier Wen Jiabao said this week that the government must work urgently this quarter to reverse the slowdown and maintain social stability amid a “very grim” outlook for jobs.
UPDATE: China reports GDP on a Year over year basis, as opposed to an annual rate for each quarter. As Roubini notes: The Chinese Devil Wears Prada: Why 0% Growth is the New Size 6.8%
The Chinese came out today with their 6.8% estimate of Q4 2008 growth. China publishes its quarterly GDP figure on a year over year basis, differently from the U.S. and most other countries that publish their GDP growth figure on a quarter on quarter annualized seasonally adjusted (SAAR) basis.

When growth is slowing down sharply the Chinese way to measure GDP is highly misleading as quarter on quarter growth may be negative while the year over year figure is positive and high because of the momentum of the previous quarters’ positive growth.

Indeed if one were to convert the 6.8% y-o-y figure in the more standard quarter over quarter annualized figure Chinese growth in Q4 would be close to zero if not negative.