New Tools for Assessing China's Economy in Near Real Time

China’s official economic statistics bureau has struggled over the years to accurately capture the state of that nation’s economy for years, where it recently was forced to revise its previous estimate of its GDP in 2016 downward. China’s statisticians have been working to improve their estimates, but still face challenges.

Beijing is in the process of updating its statistics methods to better represent its vast and quickly changing economy, especially with regards to how provincial figures are calculated by local authorities with vested interests.

Speaking of “vested interests”, local authorities in China’s provinces have some pretty strong incentives to put out data showing strong GDP growth (emphasis ours):

There are a number of reasons for doubts about the accuracy of China’s GDP. To begin, there are structural political disincentives to reporting accurate GDP figures at the local level. Local officials are promoted almost entirely on the basis of their locality’s growth rates, giving them a huge incentive to report increasing GDP figures, no matter if they are or not. Environmental concerns have also created an incentive for officials to lie: higher growth rates, when paired with the amount of coal burned, give the province an appearance of greater energy efficiency.

There is however a new tool that may soon provide a near-real time picture of how strongly the economies of local regions within China are performing. NASA’s WorldView application can be filtered with data showing the amount of light being emitted from the surface of the Earth at night as recorded by NASA’s Suomi National Polar-orbiting Partnership (Suomi-NPP) satellite, which was launched in October 2011. The satellite is equipped with the Visible Infrared Imaging Radiometer Suite (VIIRS), which is capable of providing a remarkably clear view of the Earth’s surface at night.

That near-real time imagery has been available continuously since 11 November 2016. Before that, we have only the imagery that was produced by NASA’s Black Marble project in the years of 2012 and 2016. To show how this data might better communicate the state of the economy on the ground within one of China’s provinces, we used the Worldview application to generate the following animated picture comparing the brightness of the lights in China’s Shaanxi province in 2012 against how they looked four years later in 2016, when the mining industry in Shaanxi, one of the provinces largest economic sectors, was reported to have gone through a sustained period of relative contraction.

In this animation, you can see many of the lights in Xi’an, and especially in the surrounding settlements, dim in the period from 2012 to 2016.

That dimming effect doesn’t appear uniformly all over China. For example, if you look at the coastline of the Leizhou peninsula in the Guangdong province in Southern China (immediately north of the island of Hainan in the South China Sea), you can see the night time lights in that region brightened between 2012 and 2016.

Recent economic research examining data collected over a 20-year period has concluded that there are “high correlations between the area lit from night-time lights on the one hand, and GDP, electricity consumption, and CO2 emissions on the other,” which is to say that the number and brightness of night-time lights is a good proxy for economic activity occurring at specific points and regions on the Earth’s surface.

For China’s National Statistics Bureau, using the near-real time resource provided through NASA’s Worldview application might provide a good way of performing a reality check on the economic data provided by local provincial officials in the country, where they could more quickly identify gaps between what they report and the real situation on the ground.