China has reportedly exaggerated its gross domestic product (GDP) data about an average of two percent for nearly a decade, new research has suggested.
The study, published on Thursday, explained that Beijing’s official reports are based on data provided by local governments throughout China. However, local regions are rewarded by the national government for meeting investment and growth targets, which the study argues incentivizes them to inflate their numbers.
“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 five percent of GDP since the mid-2000s,” the authors wrote in the abstract of the research paper, which is part of the the Spring 2019 edition of the Brookings Papers on Economic Activity conference.
The authors explained that their estimates “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 seven percentage points lower,” they concluded.
The Chinese Embassy in the United States did not immediately respond to Newsweek’s request for comment on the report.
As the South China Morning Post (SCMP) reported, the research comes at a time when Chinese leaders are already battling a slowing economy. This week, Beijing officially lowered its growth target from 6.5 percent to a range between six percent and 6.5 percent. Last year, China reported, although possibly inaccurately, that its growth rate was 6.6 percent. While that percentage was still relatively high, it was the slowest growth the country had experienced since 1990. For comparison, the U.S. GDP growth rate was about three percent last year.
“There are three problems with China’s GDP. One is that it doesn’t necessarily measure the right thing. Two is statistical bias in the way data is collected. Three is really a macro policy problem by the government which should write down all the bad debt,” Michael Pettis, professor of finance at Peking University in Beijing, explained to SCMP. “The NBS is only trying to fix the second problem,” he said.
Analysts have pointed to the trade war launched by Donald Trump last year as having a significant negative impact on China’s economy. The dispute involves hundreds of billions of dollars in Chinese products, which Trump has slapped with new tariffs due to what his administration deems are “unfair” trade practices. But the trade war has also removed billions of dollars from the U.S. economy while Washington’s trade deficit with China has reached an historic level.