China's GDP has been Overexaggerated According to Paper

Brookings

ABSTRACT
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. We provide revised estimates of local and national GDP by re-estimating output of industrial, 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 2008-2016 is 1.7 percentage points lower and the investment and savings rate in 2016 is 7 percentage points lower.

PDF of the Forensic Study

First, we show that the sum of local GDP frequently exceeds national GDP. Second, we compare the sum of the local consumption, investment, and net exports with national consumption, investment and net exports reported by the National Bureau of Statistics. We find little discrepancy between local and national consumption, but find a large discrepancy between local and national statistics of investment and net exports.

In other words, China is a paper tiger economically. One HUGE Potemkin Village of counterfeit goods and stolen technologies. They have systemic economic problems that scale up significantly as shown in this paper. A report like this could seriously hurt international business relations with China as many depend on the metrics they report to price goods and services like shipping. Those numbers are CRUCIAL to forecasting economic conditions that corporations are REQUIRED to perform in.

China might be the trigger. You heard it here first.

a reply to: projectvxn

Want to see my shocked face?

a reply to: Bluntone22

That's about the right reaction.

This hasn't been priced into the market, however.

Everyone might have that suspicion, but this is real data.

This one's gonna hurt. I'm worried about Taiwan right now. They don't want to be ruled from Beijing, and are currently leaders in domestic technology development.

In other news... researchers have discovered that water is wet.

Considering China has entire ghost cities of unoccupied real estate, everyone knows the economy there is a massive fraud.

a reply to: Edumakated

Absolutely true. A colleague recently returned from there on a business trip. He confirmed that there were many empty unoccupied cities.

China has recently developed a technique to allow them to construct a 57 story building in 19 days or less! So, now everyone wants to cash in......

Hope nobody is holding any Chinese commodities...
I had heard whispers of the preliminary findings of this study about 9 months ago, and thought it was a bit obvious from some (cringe) youtube channels I follow (ADVChina). The next "boom" is likely going to be in Vietnam, as they have been industrializing very quickly, while in China their average wages are now hitting levels that are above that of Mexico.

Then there is the fact that China has been pushing its citizens to buy gold and other commodities that maintain value since around 2009 (seekingalpha.com...). The purpose of this is because they have continually pegged their monetary value to that of the US dollar, and maintaining the ratio rather closely (between .16 and .14 since 2007). This simply is not sustainable in the long term, and the cracks have been showing pretty evidently.

Damn good thread, don't know how I missed it.

S+F 🤩