Eaton Corp. (ETN) Chief Executive Officer Sandy Cutler said China’s official 7.8 percent economic growth for 2012 may have overstated expansion by twice the real rate, and is only now headed for a “legitimate” 8 percent gain.
Based on indicators such as consumer consumption and electric power usage, China’s gross domestic product probably grew 3 percent to 4 percent last year, Cutler said today in a telephone interview. The economy is accelerating now that China is past the distractions from its leadership change, he said.
“That’s what we and so many multinational companies have been feeling there in China for the last year and a half, the economy really hasn’t been growing at 7 or 8 percent,” Cutler said. “If we could get back to an 8 percent growth rate in China for 2013, that would be a pretty darn good year.”
Cutler’s assessment, delivered after Eaton’s quarterly earnings report, suggested that China masked the extent of the slowdown preceding Xi Jinping’s elevation to general secretary of the ruling Communist Party in November. The government reported that GDP growth decelerated from 9.3 percent in 2011 and 10.4 percent in 2010.
China tended to “tamp down” reported GDP expansion as it ran at 12 percent or more in 2006 and 2007, Cutler said. The government boosted the official tally after slowing growth to quell inflation, said Cutler, 61, who presides over a manufacturer that got more than half its 2012 revenue of $16.3 billion from outside the U.S.
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