Markets around the world have been jolted by fears that slowing growth and deflationary pressures in Europe, Japan and other major economies could derail the United States. But the health of China, for decades an engine of growth, has emerged as one of the most significant wild cards in the global economy.
It is hard to be certain just exactly how the Chinese economy is faring, given mixed signals in the data.
Chinese inflation is at its weakest levels in nearly five years. Commodity prices are plunging. New home sales are declining. Foreign investment is contracting.
The overall economy, though, continues to chug along at a steady, albeit more modest, pace. China’s gross domestic product increased by 7.3 percent in the third quarter, compared with 7.5 percent in the previous quarter. While that was the lowest quarterly growth since the depths of the financial crisis in 2009, the rate remains the envy of major economies. The economy also continues adding jobs at a good clip, and the currency is one of very few that are still rising against the dollar.
“The question or problem we are all facing at the moment is, ‘What is right picture for the economy as a whole?’ ” said Louis Kuijs, the chief China economist at the Royal Bank of Scotland in Hong Kong. “It’s complicated by negative forces that show up very strongly in industry but not in the service sector.”
Making sense of China’s economic health is challenging because the slowdown is partly by design.
The Communist leadership has pledged to reduce China’s dependence on credit-fueled growth and investment, to instead emphasize domestic consumption. It is a risky proposal, and leaders have signaled a willingness to live with slower growth, provided employment holds up and systemic risks are contained.
One figure that Chinese leaders study closely is the number of new jobs. Li Keqiang, China’s prime minister, boasted in a speech at a World Economic Forum meeting last month that nearly 10 million urban jobs had been created in the first eight months of the year, up slightly from a year ago. As a result, he said, he would not mind if the growth of the gross domestic product fell short of this year’s official target of 7.5 percent.
“An important goal of maintaining stable growth is to ensure employment, and the floor of the proper range is to ensure relatively adequate employment,” he said at the meeting in Tianjin.
But even in the jobs figures, broad disparities exist across China. Employment has grown solidly in the services sector nearly every month in the last five years, according to the purchasing managers index compiled by HSBC and Markit. By contrast, manufacturing employment, which generally expanded from 2009 through 2011, has mostly contracted since.
At an employment fair for the medical appliance industry at a government-run career center near the Lama Temple in Beijing last week, more than a hundred job seekers bantered with recruiters and weighed their options. A 42-year-old man who gave only his surname, Mr. Lin, was applying for a job at Beijing Niubao Technology, a chemical equipment maker.
With 20 years of experience in a specialized industry, Mr. Lin expressed confidence about his prospects despite the overall outlook in the sector. “Manufacturing isn’t doing so great in the past few years, but I think chemical equipment is still doing relatively O.K.,” he said.
That somewhat positive outlook is a sharp contrast to most traditional industries. “We didn’t have any new recruits this year,” Huang Xinqun, 48, a manager at a large ocean-shipping company, said last week. “Usually when the manufacturing business is not doing so well, it would be directly reflected on us,” he said.
“We’re like a signal post on how the economy is doing,” Mr. Huang said. “If companies don’t have that many orders and products to transport, then we don’t have as much work.”
Despite the signs of malaise in China’s manufacturing and industrial sectors, the government is wary of repeating the significant stimulus measures it undertook after the financial crisis. Leaders are worried that would add to China’s ballooning debt, which rose to 250 percent of gross domestic product at the end of June, from 150 percent five years ago, according to estimates by Standard Chartered Bank.
Instead, policy makers in recent months have used targeted, behind-the-scenes stimulus measures, including extending limited amounts of short-term credit to large and medium-size banks. The government also has directed more financing to favored projects, like supporting agricultural efforts and redeveloping shantytowns.
“Things can be done to bolster activity for short periods of time, but I think the fundamental theme is a persistent ratcheting down in the measured rate of growth,” said George Magnus, a financial consultant and a former chief economist at UBS. “China is in for an extended period of volatility.”
Other major indicators offer similarly contradictory perspectives on the progress of China’s economic transition.
Retail sales are rising at their slowest pace in nearly a decade, seemingly casting doubt on the ability of Chinese consumers to drive economic growth. But with an increase of about 12 percent in value this year, sales are hardly anemic.
What is more, official sales figures fail to capture the explosive growth of online shopping in China. The statistics bureau only began including the sales of some unnamed, large Internet retailers in its data this year. But Mark Williams, the chief Asia economist at Capital Economics, estimates that official retail sales figures only capture about one-sixth of the online purchases in China.
Trade figures, too, are somewhat unclear. Reported Chinese exports rose 15.3 percent last month, their biggest increase since 2013. But that was partly because of a 34 percent increase in exports to Hong Kong.
The dynamic has prompted some economists to question whether trade figures are again being distorted by so-called over-invoicing. The practice was rampant two years ago, when China’s reported exports to Hong Kong surged when companies disguised speculative capital inflows as the proceeds from trade. Hong Kong’s separately reported imports from China are much lower, which economists say is evidence of the practice.
The most problematic economic indicator in China may be gross domestic product itself. Though economists say the data broadly are improving, the numbers do not always seem to add up. For example, the combined G.D.P. reported by each of China’s provinces still regularly exceeds the official total for the country.
Even Mr. Li, the prime minister, has at times expressed doubts over this benchmark measure of output. In 2007, when he was governor of Liaoning Province in northeastern China, Mr. Li privately acknowledged to a visiting American diplomat that China’s G.D.P. figures were unreliable and “for reference only” because they were “man-made,” according to a confidential diplomatic cable released in 2010 by WikiLeaks.
Since then, many economists have supplemented China’s official figures with their own versions of a “Li Keqiang Index,” alternative measures based on what Mr. Li said were his bellwethers of economic expansion. They include electricity consumption, rail cargo volumes and the value of loans disbursed.
“Certainly these data have the potential to be more reliable but there are complications there, too,” said Carsten Holz, a professor of social science at the Hong Kong University of Science and Technology who has scrutinized China’s economic data.
“It’s a planned economy thing,” Mr. Holz said of the Li Keqiang indexes, likening them to tallying apples on a tree but making no attempt to calculate their value.
“It is a very rudimentary measure, because you don’t know how many of these apples are rotten, or measure how big they are,” he said. “You are just counting apples.”