China Activity Proxy estimates China’s official GDP growth was overstated by 1-2% in the last two years but 2009 and 2010 were accurate

Economists have tried to put together alternative indices to estimate China’s GDP growth. One of the most thorough is produced by Capital Economics, which releases what it calls the China Activity Proxy. The data series started in 2009, so it has a track record. It’s published monthly — unlike GDP data, which is released quarterly.

The London-based research group uses one of Mr. Li’s favorite indicators, electricity output, as a proxy for industrial activity. It adds four others – freight shipment (a broad measure of economic activity), floor space under construction (real estate); passenger travel (service sector); and cargo volume (international trade).

“They are relatively low profile (statistics), so should be subject to fewer questions about data manipulation,” Capital Economics explained.

For the most part, Capital Economics finds that its CAP index generally jibes with China’s GDP numbers, especially in 2009 and 2010. But in the last two years, its CAP index suggests growth may have been 1 to 2 percentage points below the official GDP numbers.

What’s up? Mark Williams, a China economist at the firm, says official GDP numbers reflect output data and are “skewed toward what is going on in industry.”

CAP data, he says, also capture “harder to measure” parts of the economy.

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