The devil in the data series

Is growth in China soaring or slowing?

The answer depends on how you calculate growth

THE EXCITED headlines were predictable. 

When China reported its GDP for the first three months of the year on April 16th, growth soared to 18.3% compared with a year earlier. 

It was China’s fastest growth on record, underlining the strength of its recovery. 

Yet it also illustrates the oddities in how GDP is reported.

China’s recovery should be old news. 

Since last March, when the country emerged from its covid-19 closures, a wide range of indicators, from metro ridership to export orders, have pointed upwards. 

But because the convention in China is to report GDP in year-on-year terms, it is only now that the recovery makes a dramatic appearance in its most-watched data series. 

The nearly normal first quarter of 2021 is being compared with the largely locked-down first quarter of 2020. 

(If anything, the latest number was slightly below economists’ expectations.)

America and Japan instead focus on growth in quarter-on-quarter annualised terms: what growth would be if the quarter’s pace were maintained for a full year, adjusted for seasonality. 

Seen this way, America’s rebound came in the third quarter of 2020, when annualised growth hit a jaw-dropping 33%. 

China, by contrast, reported a more modest-sounding rate of 4.9% year-on-year back then.

Both methods have drawbacks, especially in times of extreme volatility. 

China’s figures are backwards-looking, reflecting the economy’s horrid state a year ago as much as its relative vigour today. 

The American figures, by contrast, exaggerated the economy’s vigour early in the rebound, when the unemployment rate still topped 10%. 

Annualised rates can mislead when output suddenly jumps or plunges; they implicitly assume that a one-off event repeats every quarter for a full year. 

In annualised terms China’s rebound was even bigger than America’s, with growth of 55% in the second quarter of 2020.

There is a third way, which is to present quarter-on-quarter growth, without annualising it. 

This is what most European countries emphasise. 

China does in fact publish quarter-on-quarter rates, but never puts them in the spotlight, partly because they are so volatile. 

Growth in the first quarter of 2021, for instance, slowed to about 0.6% from 3.2% in the preceding quarter (the latter figure was revised up from 2.6%).

Such a slowdown might cause the government blushes. 

But it would still be wise to draw more attention to the quarter-on-quarter data. 

They more accurately trace the ups and downs of the economy. 

For the rest of 2021, the quarter-on-quarter pace is likely to inch higher, even as the annual rate comes down sharply. 

That picture would better match China’s reality. 

It is a solid, somewhat bumpy rebound, not a giant one.

The Maghreb and Its Challenges for Europe

The countries of the region have a complicated past with European powers, and with each other.

By: Antonia Colibasanu

A battle for influence over the Mediterranean is underway. 

Its most hotly contested front is in the east, where Turkish designs on oil deposits have pitted Ankara directly against Greece and Cyprus and indirectly against their benefactor, France. 

Flying under the radar, however, is another contest between Turkey and France on the Mediterranean’s southernmost border: the Maghreb.

France is the major European power in the region. 

For the countries in the Maghreb, relations with Paris were a political and economic necessity; French trade, investment and influence, some of which were holdovers from colonialism, were too much to forego. 

But things have since changed a little. 

France is no longer the power it once was, and political upheaval brought on by the Arab Spring revolts has ushered in different governments. 

France regards the region as important for its security, but it needs to rebalance its position in light of these new challenges.

This partly explains why France’s prime minister canceled his trip to Algeria on April 9. 

He said the cancellation was due to concerns over the pandemic, but it’s hard to ignore how badly relations have deteriorated between the two countries. 

The past few months have been rife with diplomatic tension. 

In January, for example, French President Emmanuel Macron refused to officially apologize for France’s occupation of Algeria. 

In April, the head of Algeria’s military publicly called on his French counterpart, who thought he was in town to discuss military cooperation, to hand over maps of abandoned nuclear test sites.

But French-Algerian issues are not just French-Algerian issues. 

They play a role in the affairs of nearly all the areas of the Maghreb – especially Western Sahara, the disputed territory in neighboring Morocco – which butt up against Turkish ambitions in North Africa.

A Divisive Issue

On April 8, Macron’s party announced it would open an office in the southern Moroccan city of Dakhla, located in Western Sahara. 

The statement came just a few days after CMA CGM, France’s leading transport and logistics company, set up shop in all Moroccan ports, including Dakhla. 

Paris’ efforts to shore up influence in Western Sahara have led many to suspect the government is gearing up to recognize Morocco’s sovereignty over the territory.

The region is a divisive issue within Moroccan politics. 

Western Sahara was under Spanish control until 1974 and was annexed by Morocco in 1975. 

This led to a 16-year armed conflict between the Moroccan government and the Polisario, a political group made up of the region’s Sahrawi people and supported by regional rival Algeria. 

In 1991, a United Nations-brokered cease-fire was reached, and Morocco pledged to hold an independence referendum. 

The referendum never took place, and the Polisario continue their fight.

The ethnic Sahrawi consider their homeland in Western Sahara occupied territory. 

Northerners believe it is simply another part of the Moroccan kingdom.

The region remains within Morocco’s control. 

The U.N. considers it a conflict area, while Algeria supports its independence. 

Since Morocco and Algeria gained independence, they have been in conflict over their border, which remains closed and contested even today.

For Algeria, the key strategic priority is controlling the southern territories that threaten its security. 

The Algerian economy depends on energy production, and most of its reserves and production facilities are in the south. 

The porous desert borders and militant activity have forced Algeria to establish strong security on two separate fronts: Mali to the southwest and Tunisia and Libya to the east. 

To secure the southwest, Algeria has established a strategic partnership with Mauritania, which borders most of Western Sahara, making Morocco the only challenging neighbor for Algeria in the Maghreb. 

Morocco, on the other hand, doesn’t have the hydrocarbon resources of its neighbors to support defense expenditures. 

It has invested instead in its relationships with the United States and Arab kingdoms in the Gulf, and France.

The Broader Picture

Morocco and Algeria are the most developed countries of the Maghreb region. 

The area is united by the Atlas Mountains as well as its shared history of Ottoman and European domination. 

Algeria was a French colony while Morocco was a Spanish and French protectorate and Tunisia a French protectorate. 

The Ottomans tried to reach Gibraltar, but none of the Maghrebian provinces were under their strict control. 

All this can be explained by geography – while Morocco faces the Atlantic Ocean, which makes it harder to dominate, the other two are Mediterranean states.

Strategically, though, both France and the Ottomans wanted to reach Gibraltar, so they had to maintain a careful relationship with Morocco.

Where French-Moroccan relations have always been comparatively good, Paris has slowly lost ground in Algeria and Tunisia since 2011. 

The European economic crisis weakened the French economy, so former colonies started seeing less French trade and investment coming their way. 

Both grew increasingly unstable, but Algeria was hit hard starting in mid-2014 when oil prices started to decline. 

With no economic reforms in place, and without French investments and aid, both countries saw increased protests that triggered political change. 

Naturally, anti-French sentiment also grew. 

Many in the Maghreb had to look for a replacement for France. 

Enter Turkey, which wants to reclaim the influence it lost since the fall of the Ottoman Empire. 

Since 2011, Turkey has supported popular revolts toppling the region’s autocrats, has backed Islamic movements and has promoted the image of Turkey as a defender of the Muslim world.

In practical terms, Turkey has focused its strategy on trade and investment. 

The approach worked best in Algeria, where more than 1,200 Turkish companies have set up shop. 

While Algeria has become Turkey’s fourth-largest gas supplier over the past decade, Turkey has become the third-largest importer of Algerian products. 

Turkey gets a reliable source of cheap energy, and Algeria gets an economic shot in the arm.

For Tunisia, Turkish overtures have been a source of both progress and friction. 

Ankara’s efforts to revive Muslim sites and communities haven’t translated into much of a trade and investment partnership. 

Trade grew substantially after 2011, mostly to the benefit of Turkey, as local Tunisian businesses, especially those working in the textile sector, got hit by low-cost Turkish products. 

This forced the government in Tunis to reimpose some import duties in 2018.

Tunis has since turned to Paris for help. In 2020, the two signed a three-year framework agreement worth 350 million euros ($420 million) to “support Tunisian public policies in various fields,” and Paris has also sent medical support in the fight against COVID-19. 

In exchange, Paris is pressing the current Tunisian leadership to organize the 50th anniversary of the Organisation Internationale de la Francophonie, a symbolic move for a society that remains divided. 

Still, local support for the Turkish cultural model challenges the government extending ties to France.

Morocco was the most difficult country for Turkey to woo. 

The free trade agreement they signed in 2004 was revised in October 2020, raising taxes on imported Turkish goods by up to 90 percent. 

For Morocco, the motivation behind it was as political as it was economic. 

Not only were cheap Turkish goods flooding its market, but officials wanted to placate other allies such as Saudi Arabia and the United Arab Emirates, which are natural competitors of Turkey. 

The move is rightly seen as support for the informal Saudi-led boycott of Turkish products.


The diplomatic conflict between France and Turkey is not new. 

However, the growing war of words between the Turkish and French presidents is heightening tensions between Turkey and its Gulf allies like Qatar on one side, and between France and Gulf allies like the UAE and Saudi Arabia on the other. 

It may have the same effect in the Maghreb, where the sides are becoming increasingly clear. 

Things will likely be more complicated for Tunisia, where France and Turkey are pushing to win more influence.

Religion, especially Islam, has increasingly become a contentious issue in France. 

Almost 10 percent of the French population identify as Muslim, and according to media reports, most of the poorer neighborhoods known as “banlieues” are inhabited by immigrants believed to belong, in their majority, to the Islamic faith. 

Many immigrants in France are from the Maghreb – a third of the total and about 100,000 more than it has received from other European Union countries. 

In 2019, the Algerian immigrant community in France stood at about 850,000. About 300,000 of France's population are Tunisian. 

As Turkey is influencing the politics of both former French colonies, it is likely that their populations, including those entering France from these countries in search of economic opportunity, are equally influenced by Turkish cultural diplomacy.


In the Maghreb, the more countries recognize the Western Sahara region as part of Morocco (even unofficially), the more it could fuel tensions with Algeria. 

Considering the current economic environment, neither Morocco nor Algeria wants a full-blown conflict. 

However, history shows that countries can’t always control the scale of tensions, particularly in mountainous and desert areas where seemingly minor escalations can quickly escalate. 

The situation is not helped by the fact that Algiers and Rabat embarked on an arms race some 15 years ago, with both countries building up their supplies for a potential conflict. 

The border – and the Maghreb in general – needs a close watch since any conflict between the two countries would implicate Turkey and France, affecting European security and stability on the whole. 

The Changing Climate of Central Banking

In the space of just a few years, the idea that central banks should incorporate climate considerations into their policies has gone from sounding radical to seeming like plain common sense. In fact, the overriding risk is that central banks will do too little to address climate change, rather than too much.

Isabelle Mateos y Lago

LONDON – Nearly everywhere one looks nowadays – newsrooms, corporate manifestos, and government agendas – climate change has moved from the fringe to center stage. And central banks, after long standing on the sidelines, have recently begun to play a starring role.

The Bank of England, for example, just became the first central bank to include in its policy remit a reference to supporting the transition to a net-zero-emissions economy. 

The European Central Bank is discussing how – not merely whether – to incorporate climate considerations in its own monetary policy. 

And the Network for Greening the Financial System (NGFS), a global group of central banks and financial supervisors, has more than doubled its membership over the past two years. Its 62 central banks include those of all but four G20 member states.

Such a speedy shift is bound to invite spirited debate – as well it should. But the overall premise for the change is sound. If anything, the overriding risk is that central banks will still do too little, rather than too much, about climate change.

Over the past few years, a consensus among central-bank leaders regarding climate risks to financial stability has emerged. 

The Bank for International Settlements database shows that whereas only four central-bank governors delivered speeches on green finance in 2018, 13 did just two years later. 

And now, nearly half of NGFS members have assessed climate risks, and more than one-tenth have already carried out climate stress tests, according to research by BlackRock.

Central banks’ investment activities have duly followed suit. 

Almost 60% of developed economies’ central banks now invest using broad environmental, social, and governance criteria, and Eurosystem central banks have agreed to a common stance on climate-related investments in non-monetary policy portfolios.

Finally, even monetary policy itself has begun to align with climate issues. Late last year, Sweden’s Riksbank announced a new climate-related exclusion policy. 

Similarly, the BOE is expected to indicate later this year how it will account for the climate impact of its corporate-bond holdings. 

Several ECB decision-makers have called for climate risks to be incorporated into corporate bond purchases and collateral policy. 

And the NGFS has just published technical guidance for “adapting central bank operations to a hotter world.”

There are three main causes for this shift – all of them legitimate. 

First, close to 130 governments around the world have committed to large reductions in carbon dioxide emissions over the coming decades. 

While the policies for achieving this have yet to be fully specified, the premise that meaningful change will occur is no longer merely an act of faith. 

Central banks that integrate climate considerations into their activities thus can no longer be accused of front-running governments. 

And where a central bank’s mandate includes supporting a state’s economic policies, agnosticism (or, in central-banking jargon, market neutrality), will be increasingly untenable if it clashes with official climate commitments.

Second, the case for incorporating climate change into macroeconomic modeling and investment decisions has never been stronger. 

Extreme weather events have become more frequent, and their impact on growth and inflation more visible.

Moreover, as policy plans take shape, the uncertainty around climate-impact scenarios over the coming decades has become less daunting. 

Climate-related data have improved enormously in quality and quantity, and the availability of climate-aware investment instruments and strategies has increased dramatically. 

Their emerging performance record already indicates that they can boost portfolio resilience without sacrificing returns. 

Accordingly, a majority of institutional investors globally now consider sustainability to be fundamental to their investment strategies.

The third reason for central banks’ new stance is a growing recognition that advocacy alone is insufficient. To have a greater impact, they must lead by example. 

This calls for greater transparency about their own exposure to climate-related risks and how such risks are modeled and priced. 

Better disclosure will rest, in turn, on the receipt of adequate data from issuers whose assets central banks choose to hold.

As such, central banks will likely exert great influence over the speed with which climate-related risks are priced into the financial system. There are risks in moving both too slowly and too fast, so establishing a clear path ahead is essential.

That said, central bankers’ conversion to the climate cause is still in its youth. Many central banks have yet to join the NGFS, let alone integrate climate change meaningfully into their activities. 

The vast majority of emerging-market central banks have not signed up. 

And, globally, the BOE is the only central bank so far to have published a statement in line with the most exacting recommendations of the Task Force on Climate-related Financial Disclosures, albeit Eurosystem central banks have committed to do so within two years.

Central banks are understandably wary of mission creep, and of raising expectations that can be met only by becoming reliant on governments. 

Still, the work of the NGFS and the actions of its leading members should demonstrate to other central banks that their mandates not only permit but in fact require climate change to be incorporated into their activities. 

Numerous challenges remain, and domestic circumstances differ; but that is no excuse for inaction. Central bankers’ response to climate-change risks has plenty of room to grow.

Isabelle Mateos y Lago is Managing Director, Global Head of the Official Institutions Group, and a member of the Geopolitical Risk Steering Committee at BlackRock.