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Economic performance

(China Daily)
Updated: 2010-10-11 08:00

Sichuan province's decision to remove gross domestic product (GDP) from its tools to measure its cities' economic performance is a sensible move.

The provincial government will not assign the local authorities' GDP growth rate quotas next year. Instead, it will have 12 indicators to measure how local economies perform.

When Sichuan, in Southwest China, does not use the GDP growth rate as an indicator to measure local cities' economic performance, it drives home the message that it will follow a better and healthier economic development path.

As the largest country in the world, China has managed to maintain rapid economic development, averaging an annual GDP growth rate of 10 percent over the past two decades.

But GDP is a gross statistic. It doesn't tell the whole story. This year China's GDP is slightly ahead of Japan's. But in a very real way, China is still poorer than Japan.

Economists have used GDP, which measures the final market values of goods and services, to measure individual countries' economic performance. But its value as an indicator for the standard of living is limited, as GDP does not show how a country's wealth is distributed.

While people's well-being is believed to improve as they get wealthier, economic wealth is not everything. Quality of life depends, to a degree, on the type of goods consumed, good access to healthcare, quality of education, family relations, the integrity of public officials and the state of the environment.

For quite a long period of time, the nation has been on the wrong track. The policy of pursuing high GDP growth works at the cost of a deteriorating environment. The environmental problems, including air pollution, water shortages and pollution, desertification and soil pollution, have become more pronounced.

Meanwhile, the gap between the haves and the have-nots is widening and the unbalanced development among different regions continues to exist. So for China, the health of the economy should not be measured in GDP growth rates. Rather it should be measured in the well-being of its citizens.

One may argue there's been enough historical evidence on how an increase in GDP growth improves the lifestyle of the populace. GDP as an indicator was created in the wake of the great depression in the 1930s.

However, experts agree that GDP alone cannot reflect the economic performance of modern society.

New approaches should be found to measure the wealth and well-being of the nation beyond the traditional GDP, one that can measure "true" progress, taking environmental and social indicators into consideration. Now Sichuan is taking the lead. But how long its model will run is really in doubt as the GDP growth cult continues to dominate the nation's development pattern. Local governments are required to make a due contribution to the nation's GDP growth.