A Forensic Examination of China's National Accounts
China’s national accounts are based on data collected by local governments. However, since local governments are rewarded for meeting growth and investment targets, they have an incentive to skew local statistics. China’s National Bureau of Statistics (NBS) adjusts the data provided by local governments to calculate GDP at the national level. The adjustments made by the NBS average 5% of GDP since the mid-2000s. On the production side, the discrepancy between local and aggregate GDP is entirely driven by the gap between local and national estimates of industrial output. On the expenditure side, the gap is in investment. Local statistics increasingly misrepresent the true numbers after 2008, but there was no corresponding change in the adjustment made by the NBS. Using publicly available data, we provide revised estimates of local and national GDP by re-estimating output of industrial, construction, wholesale and retail firms using data on value-added taxes. We also use several local economic indicators that are less likely to be manipulated by local governments to estimate local and aggregate GDP. The estimates also suggest that the adjustments by the NBS were insufficient after 2008. Relative to the official numbers, we estimate that GDP growth from 2010-2016 is 1.8 percentage points lower and the investment and savings rate in 2016 is 7 percentage points lower.
This paper was prepared for the Spring 2019 Brookings Papers on Economic Activity. We thank David Dollar, Jan Eberly, Zhentao Shi and Wei Xiong for helpful comments. Zheng Song acknowledges financial supports from the Research Grant Council (Hong Kong) on “Re-Measuring China’s Regional Investment”, Project Number 14502718. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Zheng Song acknowledges financial supports from the Research Grant Council (Hong Kong) on “Re-Measuring China’s Regional Investment”, Project Number 14502718.
Wei Chen & Xilu Chen & Chang-Tai Hsieh & Zheng Song, 2019. "A Forensic Examination of China's National Accounts," Brookings Papers on Economic Activity, vol 2019(1), pages 77-141.