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.