The figures that go into China’s gross domestic product are “man-made” and “for reference only,” Li Keqiang, then a regional Communist Party head, said in 2007. 
 
 The comments by Li, now a vice premier who’s expected to become premier next spring, were revealed in a diplomatic cable published by WikiLeaks in late 2010. Li’s remarks are especially relevant as China announced today that the economy expanded 7.6 percent last quarter from a year earlier, the slowest pace in three years. 
 
 Investors, bankers and economists face a host of difficulties in interpreting the numbers from China’s statistics bureau, Bloomberg Businessweek reports in its July 16 issue. Combining all officially reported provincial GDP numbers for last year produces a total exceeding national GDP by about 10 percent, Ma Jiantang, head of the National Bureau of Statistics, said in February. Ma said that is due partly to double counting of items including factory production and that his bureau was trying to correct the issue. 
 
 China’s registered urban unemployment has moved between just under 4 percent and 4.3 percent for the last decade, while electricity consumption has slowed much faster than growth in official GDP when it normally should move more in tandem. That has stirred speculation GDP figures are being skewed upward in the run-up to a leadership transition this fall. 
 
 ‘Smoothed’ Figures 
 
 “Out of the black box comes a number, and that number doesn’t always line up with the other numbers,” says Andrew Batson, Beijing-based research director at macroeconomics consultant GK Dragonomics. “I wouldn’t be surprised if the GDP numbers this year are smoothed.” 
 
 One legacy of the planned economy is that bureaucrats are given targets by the central government for everything from steel production to harvests and local GDP. These same officials traditionally have been promoted on their success in making their numbers. 
 
 “We have a saying in China: The cadres produce the data, and data produces the cadres,” said Jin Yongjin, a professor of statistics at Renmin University in Beijing. 
 
 The government is good at measuring some pieces of the economy including industrial production and profits, said Louis Kuijs, an economist at the Fung Global Institute, a research group in Hong Kong. Those numbers benefit from a nationwide system of corporate reporting instituted decades ago to help central planners steer the economy. 
 
 “In the old system it was crucial to have that reporting system in place,” Kuijs said. “China’s industrial survey is giving us quite good numbers.” 
 
 Service Economy 
 
 The country’s statistical system may be far less capable of measuring the service economy or getting an accurate reading of consumption by the middle class. 
 
 “If you look at the number of cars produced in China, you will probably get a more or less accurate number,” said Stephen Green, regional head of research for greater China at Standard Chartered Plc in Hong Kong. “But the system isn’t good at measuring how many karaoke nights people have had or restaurant meals they have had.” 
 
 Retail sales include purchases by government offices and big state enterprises, Green said. That may explain why retail sales haven’t fallen during downturns: State entities are ordered to keep buying even when individual consumption has probably declined. 
 
 Equipment Sales 
 
 Investment banks have searched for the indicator that will predict an economic turning point. Standard Chartered looked at sales of earth-moving equipment before deciding it was a lagging rather than a leading indicator. Bank loans, as well as electricity consumption and rail cargo volume, all cited by Li Keqiang as more reliable than GDP, are still a good proxy for the economy, Green said. 
 
 Today’s National Bureau of Statistics report showed China’s growth slowed for a sixth consecutive quarter as trade and manufacturing decelerated. Last quarter’s 7.6 percent growth rate compared with an 8.1 percent expansion in the previous period and the 7.7 percent forecast by economists. 
 
 Electricity generation was unchanged in June from a year earlier at 393.4 billion kilowatt-hours, according to today’s data. That’s the first time since May 2009 that production hasn’t increased, excluding a contraction in January this year as factories shut for the weeklong holiday. 
 
 Data Collection 
 
 One new effort to gauge the economy is the China Beige Book, a quarterly survey of about 2,000 bankers and company executives, modeled on the U.S. Federal Reserve’s Beige Book. It measures growth in eight key industries across China’s major regions, said Leland Miller, president of New York-based CBB International LLC, which publishes the report. 
 
 Chinese policy makers are trying to address the government’s statistical shortcomings. More data are now directly reported to Beijing, as opposed to being first filtered through local party offices. The statistics bureau has moved to standardize data collection by China’s many ministries and industrial associations. 
 
 The bureau has also worked with the United Nations, the International Monetary Fund and the Organization for Economic Cooperation and Development to improve its tracking of the economy. 
 
 China still tends to treat its data gathering as a national secret, said Anne Stevenson-Yang, co-founder of Beijing-based J Capital Research, which analyzes equities. She cited the government’s refusal to release the weighting of goods tracked to compile its consumer price inflation index. 
 
 “Why would you ever lift the hood and show people how you do it?” Stevenson-Yang said. “That only reduces your ability to change numbers if you need to.” 
 
 --Dexter Roberts. Editors: Christopher Power, Scott Lanman 
 
 To contact Bloomberg News staff for this story: Dexter Roberts in Beijing at droberts34@bloomberg.net 
 
 To contact the editor responsible for this story: Christopher Power at cpower3@bloomberg.net ||||| China's growth has slowed to its lowest rate since the depths of the global financial crisis in 2009, though analysts voiced optimism on Friday that the economy may have bottomed out already. 
 
 Second-quarter growth of 7.6% – down from 8.1% in the previous three months – was in line with expectations, but dampened hopes that the world's second largest economy would help to offset wider woes. 
 
 "The growth rate of 7.6% is already an achievement because the economic situation facing China has been complex and severe," said Sheng Laiyun of the National Bureau of Statistics. 
 
 "We have seen tepid domestic and external demand." 
 
 Growth in the first half of the year stood at 7.8% overall, with Europe's struggles and government curbs on the property market weighing on the economy. The Asian Development Bank trimmed its forecast for the year from 8.5% to 8.2% on Thursday – echoing the World Bank's move in May. 
 
 The Chinese premier, Wen Jiabao, warned last week that the economy "still faces relatively huge downward pressure". Lower than expected consumer inflation and import growth, in addition to producer price deflation, have also unnerved investors. 
 
 Xianfang Ren, an economist at IHS Global Insight in Beijing, told Reuters: "Overall, this is a soft landing, but we can see that the Chinese economy is undergoing serious pain. 
 
 "I have 80% confidence that the economy will pick up in the third quarter as we have been in a slowdown for six consecutive quarters now." 
 
 Xiao Li, an economist at Industrial Bank in Shanghai, told AP: "It is not certain whether or not there will be a strong upward rebound. But at least the economic growth rate will stop coming down." 
 
 Sheng said the slowdown partly reflected China's shift to a more sustainable development pattern after years of double-digit growth. The government has set its target for GDP growth this year – which rarely bears much resemblance to the actual figure – at just 7.5%, after years of an 8% goal. 
 
 "The downside risks remain, but the government has plenty of tools in its hands to make sure it won't collapse. The issue is whether the government can adjust to steady and healthy growth in the medium term," said Qian Liu of the Economist Intelligence Unit. 
 
 "Obviously in the last few months, things have been slower than anyone wanted or expected – they succeeded in scaring people out of buying houses so the residential property sector fell; and they frightened local officials and bankers in terms of infrastructure. They have fixed that," said Andy Rothman of researchers CLSA. 
 
 "China's economy survived a period of much slower growth in 2009, where there were massive layoffs, without social unrest or serious problems." 
 
 The government has already cut interest rates twice in a month and lowered the amount of cash that banks must hold as reserves three times since November. Analysts expect further easing of monetary policy, but officials have insisted they will not launch a stimulus package comparable to the 4tn yuan (£405bn) package of 2008. 
 
 Retail sales growth in June fell to 12.1% from 13.8% the previous month, while growth in factory output ebbed slightly from 9.6% to 9.5%. 
 
 Fixed asset investment growth – the key driver of economic expansion over the last decade – was 20.4% in the year to June, slightly above expectations, with a sharp acceleration in the last month. 
 
 The government has long vowed to rebalance the economy away from its reliance on investment and exports towards domestic consumption, but experts say progress is proving painfully slow. 
 
 Wen told economists this week: "The measures to stabilise economic growth include boosting consumption and diversifying exports, but currently, what is important is to pursue a reasonable growth of investment."
– Hopes that a booming Chinese economy might give the moribund West a boost have taken a hit with the release of figures showing the country's growth is at its slowest since the financial crisis. The Chinese economy has slowed for the sixth quarter in a row, with last quarter's 7.6% GDP growth rate representing a three-year low. While 7.6% would sound pretty sweet to most Western countries, the figure is just one of many signs that the Chinese economy is struggling—export growth in the first half of 2012 is down steeply from a year earlier and the People's Bank of China has cut interest rates for the second month in a row in its first reductions since 2008. China is also embroiled in a fierce crackdown on real estate speculation, further reducing demand. Most analysts expect the Chinese economy to rebound later this year, although the situation may be worse than official figures show: Electricity consumption has slowed much faster than growth in official GDP, leading some to suspect that the figures are being skewed ahead of the once-in-a-decade leadership transition this fall, Bloomberg notes. Still, "China's economy survived a period of much slower growth in 2009, where there were massive layoffs, without social unrest or serious problems," an analyst at CLSA tells the Guardian.