Alternative measures point to lower Chinese GDP growth than official figures suggest

The pace of GDP growth carries huge political gravitas in China. The growth target this year, 6–6.5 %, is fulfilling president Xi Jinping’s goal of doubling real 2010 GDP by 2020.

Official GDP growth has been remarkably steady, hitting annual growth targets even as other measures of economic activity suggest the deteriorating economic conditions in recent years, not to mention the increase in economic uncertainty from e.g. trade disputes. Official figures also fail to reflect normal business-cycle fluctuations.

The deficiencies in China’s GDP statistics and criticism of China’s reported growth figures is hardly new. Alternative indicators that might provide a more honest picture of growth have been suggested for years. Many of these other measures suggest that growth is currently lower than official figures. For example, the US-based Conference Board releases its own alternative GDP growth estimates for China. According to it, Chinese growth in recent years has been lower on average by about 2.5 percentage points from the official figures. The Conference Board put 2018 GDP growth at 4 % and sees it falling to 3.8 % this year.

A BOFIT Discussion Paper released last December also noted that actual Chinese GDP growth has run on average at more than 1 % below the official numbers since 2014. The assessment considers alternative methods of estimating the GDP deflator. China does not disclose the deflator it uses to describe price trends in determining real GDP growth. Specifically, the deflated real growth figures in official statistics are astonishingly consistent. The use of an alternative deflator also reveals business-cycle variations as one might expect to see. Using the average alternative deflator from the study, GDP growth in the first quarter was below 5 %.