China has been using a lot of cement.
During the past 100 years, the U.S. needed cement for an interstate highway system and new skyscrapers. We built the Hoover Dam, many bridges and suburbia. And yet, from just 2011 to 2013, China used more cement than we did.
Where are we going? To questions about China’s GDP.
(And a note: When you think cement, think concrete. Cement is the powdery lime and clay substance that we combine with water and gravel or sand to make concrete.)
Cement in China
Thinking of China’s urbanization, we could imagine the multiple high- and low-rise concrete structures that were built for the millions of people who moved from the farm to one of China’s hundreds of cities. We could look at the cement that their infrastructure spending on roads and rail and airports has required. All of that cement would have been a part of China’s GDP growth during the last decade.
And that is the problem.
As a state-owned industry, cement producers had little need to achieve cost efficiencies. In addition, they were an ingredient in China’s five-year plan recipes that left no room for failure among local officials. The results probably meant low quality, overbuilding and inaccurate statistics.
Our Bottom Line: China’s GDP
Composed of government and consumer spending, gross investment (mostly business spending) and exports minus imports, China’s GDP has consistently exceeded the government’s targets.
With cement but one example of why China’s GDP figures might be questionable, we can see why the current economic slowdown could represent a much bigger problem.