Updating Priors on the Chinese Economy

Christopher Balding has a an interesting piece on Chinese statistics on growth, GDP, and consumption.  As you might expect if you have even a cursory knowledge of China, the stats are highly suspicious.  But as Balding reveals, they’re suspicious in an interesting way.  In the course of looking at rural consumption figures, he comes up against the revelation that due to changes in methodology the statistics are not really comparable from year to year.  Even more importantly, even basic figures like national GDP have frequent but unannounced methodological changes such that they are not comparable over time.

How should this alter your views on China?  First and foremost, we know much less about its recent economic history than we think.  If it is altering the methodology from year to year, then statistics both on levels and growth have huge unacknowledged error bars around them.  Secondly, it should worry people about future growth levels.  There are two possible scenarios.  One is that the Chinese government does not think it worthwhile to keep reliable economic statistics.  The second is that the “real” statistics are secret and the public statistics are manipulated to serve political interests. Neither has particularly positive implications for the quality of economic governance in China and its future trajectory.

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