What China's GDP numbers don't tell us

Anxiously, the world held its collective breath when China announced its 2016 second quarter GDP growth rate, and then collectively exhaled with great relief, for it was 6.7 percent, the same as in the first quarter. The steady growth, slightly beating forecasts, signaled that China's economy is well and on course. Stock markets worldwide need not panic.

The initial anxiety and the subsequent relief are both misguided. At best, GDP growth rates tell only part of China's economic story.

Consider the widespread displeasure over China's slowing growth. How terrible is this? Ten years ago, in 2006, when China's growth rate was a robust 12.7 percent, everyone was happy - count on China to drive world economic growth. Now everyone is on edge about China. But consider this: the GDP base is far bigger. In 2005, China's GDP was $2.3 trillion, and 12.7 percent growth meant an increase of less than $300 billion in 2006. Fast-forward 10 years. In 2015, China's GDP was $11 trillion, and 6.5 percent growth would mean an increase of over $700 billion in 2016 - more than twice the absolute amount the economy grew in 2006 when the growth rate was that happiness-engendering 12.7 percent. And since China's population in 2016 is only marginally more than it was in 2006, the absolute amount of GDP growth per capita will be well more this year than it was a decade ago.