Little, if anything has managed to give Shanghai’s main stock market, the Shanghai composite, a boost recently. It is the world’s second worst performing stock exchange this year after Greece. But news last week from China that the National Bureau of Statistics revised up the country’s GDP growth for 2009 by 0.4 percentage points to 9.1 per cent was enough to lift the index up from a 15-month intraday low on Friday to close up 0.4 per cent.

Some, like Morgan Stanley’s Wang Qing suspect the revision to be an attempt by the government to correct an under-estimation of consumption. Yesterday, Guo Shuqing, chairman of China Construction Bank, reinforced this thought when he told an audience in London that China’s consumption is “possibly undervalued.” The head of the world’s second largest bank by market capitalisation also said aggregate consumption in China, as well as its acquisition of global natural resources, was too much, too fast and unsustainable.

A lot of discussion on China focuses on claims the country does not consume enough domestically. Many investors believe China’s under-consumption disturbs global markets and they assume that if China pushed its $1,600bn personal consumption figure closer to America’s $10,000bn, the global financial keel would be more evenly balanced. But as last week’s NBS revision revealed, some of the country’s domestic consumption is not being calculated properly.

While addressing a small audience at London’s Chatham House, CCB’s Guo focused on significant increases in China’s average growth in various sectors from 2004-2009. Before inserting a caveat on the flaws in China’s method of collecting statistics, Guo said consumption may appear to be at a low level but it is increasing at a “very fast” rate. Sectoral data show that average growth rates for 2004-2009 in cars, internet, mobile phones and refrigerators jumped by 34.7 per cent, 32.5 per cent, 17.4 per cent and 11 per cent respectively.

What’s more, according to China’s Statistic Abstract for 2010, the country’s compound annual growth rate - the year-on-year GDP growth rate of growth in per capita consumption from 1978-2009 is 7.12 per cent.

But Guo said this might be underestimating actual consumption growth. First, rural consumption figures are not based on full market prices. Also, private entrepreneurs tend to count personal expenditures in their yearly business cost calculations. But the largest culprit of inaccurate statistics may be in the NBS’s approach to collecting its household expenditure survey. These surveys don’t include China’s 100m-300m migrant workers, according to Guo, former vice-governor of the People’s Bank of China.

If Guo is right, the outlook for China’s economy may be more optimistic than it seems. Plenty of investors are hoping this is the case - global markets, on hold as fears of a double dip recession seem impending, can surely do with a boost now.

http://blogs.ft.com/beyond-brics/2010/07/06/chinas-silver-lining/