China revised its 2014 growth rate to 7.3% from 7.4% due to a weaker-than-reported contribution from the service sector, casting doubt on an economic bright spot amid concerns about the health of the world’s second-largest economy.
The change is relatively small but suggests that China’s effort to meet its official growth target of about 7.5% last year was tougher than it seemed. It comes as worries grow that China will struggle to reach this year’s goal of about 7%.
“That’s the beauty of using ‘about’ in your targets,” said IHS Global Insight economist Brian Jackson. “It’s undefined. No one knows if you reach it. Even they may not know. It gives them flexibility to revise it later.”
The country’s gross domestic product last year totaled 63.614 trillion yuan, or about $10 trillion, China’s statistics bureau said Monday. That was down 32.4 billion yuan from its initial estimate in January of this year. The change amounted to less than 0.1% of China’s overall economy. The statistics bureau said the number could be revised one again when it releases final results in January 2016.
The main reason for the change was the service industry, which the agency said grew by 7.8% rather than 8.1%. China is trying to shift its economy from debt-fueled investment to consumption and services.
The downward revision to growth comes as slower economic momentum last year carries over into 2015. Weak domestic and global demand, high debt levels and industrial overcapacity have left many factory owners reeling.
China’s growth target of about 7% this year is the slowest pace in a quarter century. Chinareached that level in the first half of the year, helped by a strong contribution from equity sales tied to a boom-and-bust cycle in its stock markets. But growth could weaken in the second half as momentum slows and the contribution from financial services falls off. Concern over China’s economic growth has helped fuel a slump in global markets in recent weeks.
China’s official services purchasing managers index has remained strong at readings above 53 this year even as the manufacturing counterpart has struggled. The manufacturing PMI dipped into contractionary territory in August with a reading of 49.7. A number above 50 indicates expansion, while a number below 50 represents contraction. Services have been growing steadily, accounting for 48.2% of China’s GDP in 2014, up from 46.9% in 2013 and 45.5% in 2012.
Chinese officials have sought to reassure a domestic audience and global investors that the economy is solid and that it will improve as interest-rate cuts and stepped-up fiscal spending take effect. “This government is trying to boost confidence in both the economy and their ability to handle it,” said Standard Chartered economist Ding Shuang.
On Monday, China’s top economic-planning body said the country was on track to meet the government’s annual growth target, pointing to indicators ranging from electricity consumption to train freight to housing prices that it said suggested an economy on the mend.
Over the weekend, Zhou Xiaochuan, the head of China’s central bank, said that the “correction in the stock market is almost done” and that China’s currency is steadyingafter last month’s devaluation.
On Sunday, the China Securities Regulatory Commission said China’s state-owned margin loan provider will continue to stabilize the market when drastic price fluctuations lead to systematic risks.
Accurately tracking services is a challenge even for advanced countries given the number of family-owned companies, one-person operations and Internet ventures. The revision won’t make it easier for China to reach its 2015 target, said Mr. Ding, of Standard Chartered, given that the same collection method for services will be applied in both years.
China’s tends to revise its GDP figures—which have come under criticism for inconsistent methodology and poor transparency—less frequently than some other countries. Last year Beijing raised its estimate of 2013 economic output based on a new survey.
If this is the start of more meaningful revision process by the statistics bureau, it could bring Chinese practices more in line with other countries, even if the information is released several quarters late, economists said.
“In the U.S., revisions cause havoc, with all the economists having to revise their models constantly,” said Mr. Jackson at IHS Global, adding that any move this year by China to “massage the data, but not go beyond plausibility,” could give analysts a better picture of the real state of the economy.