It’s hard to read anything about China’s economic growth without at least a comment or two about the possible unreliability of official data. Most people who question the data assume the government is overstating growth. This article is a summary of research by some academics who looked for alternative ways to measure China’s growth. Their surprising conclusion is that China’s official data might be understating the country’s economic growth.
On the contrary, while we generally can’t reject that the official growth estimates are correct, we also can’t reject that they have understated Chinese growth since 2012, with the true level being closer to the average seen in the 2005-12 period. Our results are consistent with work by Rosen and Bao, who argue that Chinese statistical services have chronically underestimated the size of the service sector. Rosen and Bao’s hypothesis is consistent with our finding that rail freight growth should receive less weight than the other indicators in the Li Keqiang index. Hence, as the Chinese economy becomes increasingly service-oriented, the (conventional) Li Keqiang index will likely send increasingly faulty signals about the state of China’s economy. In fact, our estimate for Chinese growth shows an appreciable acceleration in 2016, even as the official growth rate remained virtually unchanged.