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Nighttime satellite images shed light on China’s economy

Updated: May 2,2017 7:40 PM

Beijing and Tianjin are seen in a nighttime satellite photograph.

A recent United States economics study shows the Chinese economy may be performing better than official data indicates, reports MarketWatch, a business news website owned by Dow Jones & Co.

The study is authored by Hunter Clark and Maxim Pinkovskiy from the Federal Reserve Bank of New York and Xavier Sala-i-Martin from Columbia University. It compares images of satellite-recorded nighttime lights with various published indicators of the state of the Chinese economy.

The report suggests the Chinese economy is currently performing better than official data shows. “We see that our methodology predicts Chinese gross domestic product growth to have been lower than official estimates before the crisis of 2008, to have experienced a shallower decline in 2008 and a stronger recovery in 2009 and 2010, and to have stabilized at a higher level after 2011,” the authors said.

“For example, our index agrees with both the Barclays and the Bloomberg indexes in estimating Chinese growth to have been around 11 percent in 2007, and not to have experienced a substantial spike before the financial crisis, while the official GDP series records growth as spiking from 12 to 15 percent between 2005 and 2007. However, our predictions for current Chinese growth rates are above those of market participants, as well as of the Chinese government itself,” the report said.

The economists believe that the inconsistency may come from China understating the growth rate of its service industry, which would progressively understate growth as services become a large fraction of Chinese economy.

Data on nighttime lights is maintained by the US National Oceanic and Atmospheric Administration and is publicly available. Previous studies found lights are strongly correlated with measures of economic activity levels, as well as, growth rates.