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Implausible 3.7-percent growth in Ag GDP

China's agricultural output grew 3.7 percent year-on-year in the first half of 2024 according to GDP figures released this week by the National Bureau of Statistics. This was slower than overall GDP growth of 5 percent reported for the first half of the year. By comparison, industrial output was 6 percent as China reverted to its old economic model of churning out manufactured products at a pace that far exceeds the domestic economy's ability to consume them.

The 3.7-percent growth in agriculture, forestry and fishing reported by the Bureau seems implausible when looking at its components reported by the Bureau's rural survey office. Summer grain output, consisting mainly of winter wheat harvested in the summer, grew only 2.5 percent. Meat output grew only 0.6 percent, weighed down by a 1.7-percent decline in pork output and a -0.9-percent year-on-year drop in mutton output. Milk output grew 3.4 percent and egg output grew 2.7 percent, two bright spots but slower than the overall 3.7-percent growth rate reported for agriculture. 

In another implausible statistic, the Bureau reported that per capita rural household income grew 6.8 percent (6.6 percent at constant prices). Earnings by rural migrant workers went up only 3.9 percent, and as noted above farm output went up 3.7 percent, a little more than half the 6.8-percent growth in rural income growth. Where could such income have come from? 

The Bureau reported that per-capita expenditures on food, tobacco and alcohol went up 7.8 percent, including a whopping 17 percent increase in food service expenditures. 

This growth in food spending also seems inconsistent with other data indicating tepid growth in output and falling prices. If consumer food spending is so robust, why are farm prices falling? Stagnant meat output seems to indicate weak consumer demand. The Bureau said farms reduced their sow inventory by 6 percent from a year ago, a sign that weak consumer demand is spurring producers to cut capacity. Sheep inventories are down 3.9 percent and beef cattle inventories are up just 0.9 percent from last year, again suggesting a vote of no-confidence in Chinese consumers. 

Investment in China's agriculture is also tepid. The Bureau reported that fixed asset investment in agriculture grew 3.1 percent in H1 2024. Most investment is going into the industrial sector which saw a 12.6-percent increase in fixed asset investment. 

The rural survey office's report concluded that agricultural production is stable and leading recovery of the rural economy but warned that drought in the north China plain and flooding in the Yangtze River valley could affect agricultural production.

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