How Big is Our GDP? How Big Do You Want It To Be?

I am Hal’s complete lack of surprise:

Baseline Chinese economic data is unreliable. Taking published National Bureau of Statistics China data on the components of consumer price inflation, I attempt to reconcile the official data to third party data … To correct for these manipulative practices, I use third party and related NBSC data to better estimate the change in consumer prices in China between 2000 and 2011. I find that using conservative assumptions about price increases the annual CPI in China should be adjusted upwards by approximately 1%. This reduces real Chinese GDP by 8-12% or more than $1 trillion in PPP terms.

This is just one paper, of course. But it’s also not the first time I’ve heard this.

Argentina does the same thing, incidentally. Economists who aren’t named Paul Krugman have decided to just ignore any economic data coming out of Argentina, since it is all officially washed and dry-cleaned by the Kirchner regime. The old Soviet Union also did this, massively overstating their GDP (in part because presenting realistic numbers to authorities was a good way for a factory manager or local ruler to end up in Siberia).

(Our own measures of inflation are controversial, but they have one thing that China lacks: transparency. It’s quite easy for people to use the data to build alternative estimates of inflation and many have.)

China’s economy is in for a rough time in the decades ahead. They’ve basically picked all the low-hanging economic fruit. They will now have to deal with massive rural poverty, problematic infrastructure, absurd levels of pollution and, thanks to their one-child policy, a population that’s going to get older faster than any country in history. So expect more deception out of their government on. And expect people like Thomas Friedman to eat it right up.

Comments are closed.

  1. AlexInCT

    China’s economy is in for a rough time in the decades ahead.

    I have been saying this ever since I saw China abandon its soft power-long term approach for this more confrontational style of the last 4 or so years. At first I wanted to just blame it on a weakened US, but there is a lot more there. I think the Chinese leadership knows the house of cards is on the verge of collapse, and they are getting ready to make everyone around them pay as they distract the people at home from the collapse. Speaking of Argentina, that was what the whole Falkland invasion was about: distracting the locals because the economy was falling apart. That’s why they are again talking trash about their Malvinas these days down that way still.

    China is going to get ugly, I am afraid. Anyone not seeing that yet is going to be in for some rude awakening. We are dealing with some major egos, some serious complexes, an unbalanced population with some 70 million young men that can not find a women, some 400 million people still living in abject poverty and the 18th century, and a lot of crazy. Not a good recipe.

    Thumb up 3

  2. Seattle Outcast

    China is a house of cards, ready to fall apart the moment someone starts picking at it. What they attempt to project to the world is nothing more than lies built upon a propped up currency, stolen technology that they don’t get right half the time, corner cutting, and a massive labor force that works under conditions not tolerated in the civilized world.

    Until China gives up being run by a ruling class of petty despots, embraces rule of law, and decides that taking shortcuts to everything doesn’t work, it will always be a house of cards.

    Thumb up 0