So who understands the Chinese economy? Definitely not China

Everyone knows that China's economic data is much worse than the official numbers. Just how big are the lies?

Published October 22, 2023 12:05PM (EDT)

Stock Market Graph and Chinese banknote, closeup (Getty Images/claffra)
Stock Market Graph and Chinese banknote, closeup (Getty Images/claffra)

In the end, the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it.
— George Orwell, "1984"

It’s hard to throw a metaphorical rock anywhere on the internet these days without hitting an article about Chinese economic statistics gone wrong. Anyone who has paid even a shred of attention to China’s official reports over the past 30 years is probably aware of the fact that they’ve consistently been manipulated, always in the same direction. 

“Clearly nobody believes the data,” said Sushil Wadhwani, a former member of the Bank of England’s Monetary Policy Committee, in 2015. Erik Britton of Fathom Consulting explained that at his company, “We think the numbers are a fantasy.” Reuters went one step further in 2017, proclaiming that “China’s economic statistics aren’t fake enough” to reach the People’s Republic’s future goals. (Emphasis added.)

NPR host Steve Inskeep once quipped, when relaying a story from the outlet’s “Planet Money” podcast, “If it were possible on the radio, we should broadcast each story about China's economy with an asterisk. For example, China's economy slowing down, asterisk. The footnote would mention that we don't know how much. Like the United States, China does publish economic numbers. Unlike the United States, nobody believes these numbers.”

Well, it turns out that China’s economy is slowing down, asterisk. China has slipped into deflation, which has virtually no modern correlation with a growing economy anywhere on the planet. Its youth unemployment rate has gotten so bad (about a quarter of the entire 16-to-24 population) that Beijing has decided to simply stop publishing that embarrassing data altogether. After the colossal Evergrande bankruptcy, an even larger Chinese real estate mega-corporation, Country Garden, has missed multiple bond payments and been removed from Hong Kong’s benchmark Hang Seng Index. Total U.S. imports from China have plummeted from over $50 billion per month in August 2022 to just under $35 billion, as of June of this year.

But Inskeep’s point about the lack of a clear overall picture of China’s economy remains true — we don’t know how bad the slowdown really is. That’s not because the central government is unwilling to put out negative indicators; plenty of those have been released in the past year. There is no reason, however, to assume that China’s National Bureau of Statistics (NBS) has ceased to massage numbers, even while being forced to adjust them downward in order to appear at least somewhat in touch with realities on the ground that both outsiders and Chinese citizens can observe. And if massaging proves too difficult, there’s always the option, as with the youth unemployment rate, of ditching the information altogether:

A graph of a number of people

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(Reproduced with permission from original creator John Burn-Murdoch)

But even that policy is not the most significant problem with China’s data. The most significant problem is the same one that’s existed for decades. It’s the big kahuna. The whole enchilada. The giant, supposedly $18 trillion elephant in the room:

G. D. P.

Chinese GDP is “manmade,” “unreliable” and “for reference only,” according to Li Keqiang, who was head of the Liaoning province when he made those remarks “with a smile” in 2007. He would go on to be promoted to a national vice-premier and then full-fledged premier, the second-highest position in the country, where he would eventually smile far less as he admonished provincial officials to “tell the truth” in their reports to Beijing.

In 2013, stories about China’s “bonus” 32nd province circulated after the central government reported national GDP at a level 10% below the number that would result from simply adding all the reported provincial data together.

Those calls would go largely unheeded. Over and over again, Chinese provinces — including Li’s old stomping grounds, Liaoning — have been caught cooking their books. In 2013, stories about China’s “bonus” 32nd province were widely circulated after the central government reported national GDP at a level about 10% less than the number that would result from simply adding all the reported provincial data together. As it later turned out, this phenomenon had actually happened every year since at least as far back as 2002. Its origins lay in policies that the Communist Party initially supported wholeheartedly, which Thomas Rawski of the University of Pittsburgh illustrated just a few years earlier:

Beijing “announces a campaign to achieve 8 percent growth during 1998. Provincial officials were told, 'Whatever segment of the economy you're responsible for must contribute its share to 8 percent growth.' Shanghai's municipal government even ordered its subordinate units to draw up plans to achieve 12 percent growth. All plans that did not call for 12 percent growth were returned for revisions…. Pressured to meet impossible goals, local and provincial officials submitted exaggerated or even fabricated reports to national statisticians, who were powerless to verify the numbers.”

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Rawski’s ultimate conclusion about that period in Chinese economic history? “[T]he Chinese economy actually contracted by about 2 percent in 1998, when the government was reporting an increase in GDP of 7.8 percent," he said. "A similar contraction may have occurred during 1999. Chinese reports of 7-8 percent growth during the last two years ‘probably are exaggerated, too,’ but closer to reality than the official numbers from the late 1990s.”

The NBS has gradually gained more authority to override or go around provincial officials, and has made public spectacles out of the wildest economic claims put forth by some of those officials, as a grand display of rooting out corruption. But as the NBS has accumulated clout, there are also signs that it has simply become the new state instrument for manufacturing the “proper” data. With great power, after all, comes great responsibility. 

One such great power was bestowed upon the NBS by a 2003 law that gave the agency the ability to change previous long-run GDP numbers. The bureau subsequently used this power to declare in 2005 that the Chinese economy was a whopping 17% larger than had been reported up until the previous day. 

Sometimes, two and two make five.

In 2014, “The NBS claimed the ‘sole right to evaluate GDP and growth rates of every province and municipality.’ But since then, the agency has never explained how it reconciles local data with national results.”

China’s National Bureau of Statistics used its extraordinary power to declare in 2005 that the Chinese economy was a whopping 17% larger than had been reported up until the previous day. 

Events like these, coupled with the transparent political motivations of the CCP, made much of the world skeptical about China’s headline economic numbers. “Engineering the greatest economic expansion in the world was a matter of self-preservation for the Party,” as U.S.-Asia Law Institute scholar Teng Biao explained the unspoken policy. The West “failed to consider that China’s economic metamorphosis was built on the bloody legacy of Tiananmen.”

Sometimes, that drive for self-preservation meant legitimate market liberalization which truly lifted millions upon millions out of poverty, as several of China’s neighboring countries had already accomplished. But quite often, it meant dazzling Chinese citizens and Westerners alike with bullet trains and massive solar farms, even if most of the trains were empty and most of the solar power was never used. It meant building fake cities full of fake apartment buildings, fake landmarks, fake airports and fake Pentagon-sized shopping malls, because maybe one day real people would actually live and work in those places. It meant that China started publishing trade data that did not match the corresponding numbers directly reported to other countries — amounting to more than 1% of Chinese GDP per annum.

And it meant that the NBS has declared in almost every year of this century that the government’s predetermined annual GDP target had been met or exceeded, a level of consistency that many economists consider utterly impossible. Radio Free Asia’s 2018 assessment of the NBS noted that “during China's unacknowledged slump in 2015, economists estimated that the NBS was overstating GDP by a far larger amount [than initially estimated], as much as 2 to 3 percentage points, as it reported steady growth of 6.9 percent. After recovery, China posted the same rate for 2017. The official rate so far this year remains nearly unchanged at 6.8 percent, posing questions about the data behind such rock-solid results.”

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To be fair to the NBS, it has likely been stuck playing the dual roles of both villain and victim since President Xi Jinping took power. Xi has consistently waged a war against corruption during his time in office, sometimes as an excuse for targeting political enemies, but just as often in an apparently honest clean-up effort. He tasked the NBS with the scrutiny of thousands of suspicious companies, and the results were overwhelmingly negative:

Since 2017, the NBS has inspected 2,051 companies and 2,942 fixed-asset investment projects with "abnormal data," state media reported. The agency found that figures were "severely fabricated" at 1,195 of the companies, or 58 percent of those inspected. … The investigation exposed even higher falsification rates among the investment projects with serious fraud in 2,775 cases, or 94 percent, of those examined. Companies in the privileged Port Economic Zone of northeast Tianjin city's Binhai New Area were found to have inflated their data by an average of 56 times the real levels. … Inner Mongolia's Kailu County pumped up its data by a factor of 10, while enterprises in Xifeng County in northern Liaoning province multiplied its results by 6.7 times, according to the report.

As Derek Scissors, a scholar at the American Enterprise Institute, asked, “Why does the central government believe that companies and government offices that have never submitted accurate information even know how to do so?"

All of this (and more) is why many outside organizations have tried to use various methodologies to determine what the actual size and growth rate of the Middle Kingdom’s economy might be. One group of economists used multiple factors and found China’s GDP to be roughly 20% smaller than advertised. Carnegie scholar Michael Pettis has stated that if the mountains of bad debt within the Chinese economy were treated as they would be in “any other country,” overall GDP growth would be half of what is normally reported. One remarkable study by Luis Martinez of the University of Chicago used satellite data of ground light produced at night across a wide variety of countries to conclude that the entire Chinese economy amounted to less than half of the official figure.

One remarkable study by the University of Chicago's Luis Martinez used satellite data of ground light to conclude that the entire Chinese economy amounted to less than half the official figure.

So the ultimate question is, what’s the real answer? What’s the actual GDP of the People’s Republic? Beijing claims it to be $18 trillion, and plenty of outlets just repeat the official line without a second thought. But that number was built upon the previous year’s number, which was built upon the previous year’s, and so on. Every year’s amount of growth (or “growth”) simply modifies whatever overall GDP figure was already in existence. Even China’s own National People’s Congress has acknowledged that “previous NPC reports and audits over the years suggest that local officials and enterprises may be stuck in a trap of past data inflation.” 

Looking back at the history of how China has arrived at that $18 trillion today — after years upon years of manipulated or completely fabricated provincial statistics that never even added up correctly, which were then taken by the NBS and “adjusted” skyward all at once, and then altered to include directly-reported corporate and local numbers that ranged from 58% to 94% fraudulent and included values that were up to 56 times larger than what existed in reality, and then were increased every January by whatever amount the CCP saw fit to announce the previous spring, and then were “fixed” to avoid massive levels of unacknowledged debt and giant inconsistencies in trade data, and then were annually thrown into an algorithmic “black box” to produce final results that nobody at the NBS has ever cared to explain — how could current officials not be trapped? How could any of them possibly go back in time, through decades of cooked books and made-up numbers, to somehow extract accurate information and correct the current facts accordingly? What would allow them to escape the mathematical prison of “past data inflation”?

When evaluating the big picture, this error-plagued progression’s current result — that shiny $18 trillion figure, which the CCP still hopes will one day surpass the American equivalent — seems so cartoonish that it might as well be written in crayon. Based on the preponderance of the evidence, there’s one conclusion about what China’s true GDP is that seems more likely than any other:

They don’t know. 

How could they? What part of the above series of events would somehow have resulted in landing upon anything close to the correct number today? And more importantly, from the CCP’s perspective, what purpose would be served by digging into the records and addressing the many obvious problems to be found therein, thus fanning the flames of the recent parade of bad economic news that the government has already been forced to acknowledge?

No, the party’s attitude towards this singular and psychologically crucial bit of information can perhaps be best summarized by returning to the wisdom of a great philosopher named George — not Orwell this time, but Costanza: 

“It’s not a lie … if you believe it.”

By Joe Tauke

Joe Tauke ( is an economics and politics writer, and previously worked in communications on Capitol Hill.


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