As reported by Wall Street Journal, in 1998, the Asian Financial Crisis brought the region’s economy grinding to a halt. A closed capital account protected China from the speculative attacks that crippled Thailand, Indonesia, and South Korea. But with major trade partners sliding into recession, China was not immune to the effects. Falling growth in energy consumption, airline passenger numbers, and imports all pointed to a sharp slowdown in growth. But if the economy was indeed sliding into recession, it was not evident to the National Bureau of Statistics. Official data for the year shows GDP growth of 7.8%, down only slightly from 8.8% in 1997 and within spitting distance of the magic 8% that is believed to be the minimum required to maintain social stability in China.
The 1998 GDP data has generated a storm of controversy. Academic economists have expended much energy in either defending the NBS calculation or, more common, attacking it and offering their own alternative estimates. Professor Harry Wu of Hitotsubashi University in Tokyo and the late Professor Angus Maddison were among the most stern, concluding on the basis of their own index of industrial production that China‘s GDP grew just 0.3% in 1998 (minus-0.1% in Professor Wu’s recent updated results). Professor Carsten Holz of the Hong Kong University of Science and Technology has weighed in forcefully on the other side, concluding that although there are inherent difficulties with calculating the GDP of a large and rapidly developing economy, it is difficult to identify systematic biases in the NBS data or to arrive at compelling alternative estimates.