Economic Statistics with Chinese Characteristics; As phony as any communist claim

Bluster, denials, demands, and downright squealing appear to dominate the communist Chinese media and diplomatic response to the reciprocal tariffs imposed by US President Donald Trump. For example, in April after the announcement of 145% tariffs on Chinese goods, China’s Ministry of Finance called those actions a “joke” and stated it no longer considered them worth matching or even responding to. The China’s State Council Tariff Commission issued this statement: “This practice of the US is not in line with international trade rules, seriously undermines China’s legitimate rights and interests.” Even Chinese leader Xi Jinping got into the act calling on the EU and other nations to resist the “unilateral bullying” of the US in responding to the US’s reciprocal tariffs.

Employing a standard communist tactic, the CCP’s information warfare campaign to blunt and mask the potentially devastating effects of US tariffs kicked into high gear with a flurry of stories citing rosy Chinese growth and production statistics. For example, the National Bureau of Statistics of China claimed on 16 April that “the gross domestic product (GDP) in the first quarter reached 31,875.8 billion yuan, up by 5.4 percent year on year at constant prices.” This is odd given that this GDP growth (if actually achieved) would seem to indicate that US tariffs are having zero impact on China’s export economy. China Daily attempted to calm Chinese domestic concerns and the US-China tariff war by claiming on 28 May that “[o]fficials and economists said the positive [economic] trends underscore the effectiveness of stimulus policy measures in cushioning the impact of the United States’ tariff hikes and stabilizing market expectations.”

CHINESE ECONOMIC STATISTICS

Foreign observers suspect that official NBS statistics routinely obfuscate systemic problems in the Chinese economy, including property sector contraction and local government debt. These systemic problems are driven by local governments which are rewarded for meeting the growth and investment targets set by the National Development and Reform Commission (NDRC) and therein have incentives to skew local statistics.

Last year’s numbers are a case in point. As noted in January by the Atlantic Council, while NBS reported that China’s 2024 GDP growth came in almost exactly at the predicted 5%, the “Rhodium Group estimates that China’s GDP grew between 2.4 percent and 2.8 percent in 2024, well below NBS figures.” Rhodium noted that the 5% GDP growth numbers do not square with “retail sales growth at half the 2023 rate, consumer confidence at rock bottom, consumer price inflation near zero, and declining e-commerce sales.” Is NBS cooking the books?

While the Wall Street Journal, Reuters, and the Financial Times routinely report NBS statistics without comment, others have questioned their accuracy for years. For example, the National Bureau of Economic Research published an analysis in 2019 that concluded “[China’s] GDP growth from 2010-2016 is 1.8 percentage points lower” than that reported by the NBS. In another example, independent research firm Macro Polo noted that seven Chinese provinces had been caught “overstating their GDP by 10 percent or more” from 2016-2020.”

Sometimes the local falsification of data is so egregious that even the NBS has to publicly acknowledge the problem. This happened after a corruption crackdown in Liaoning and Inner Mongolia provinces in 2018 that resulted in the local statistical bureau (the local office of the NBS, for all practical purposes) issuing new revised estimates of local GDP in 2016 and 2017 that were, respectively, 22% and 11% lower than previous year’s official numbers.

The local government corruption that is apparently endemic in China is fairly easy to understand. The CCP has a longstanding Cadre Exchange System (干部交流制度) that rotates officials across provinces, cities, and other administrative units and departments on a periodic basis much like the periodic changes of duty stations for US military personnel throughout their careers. Local Party secretaries, governors, mayors, and even bureaucrats in statical bureaus are routinely rotated through different roles and locations every 3-5 years, ostensibly to give them experience needed for promotion, as well as to maintain continuity of the CCP’s centralized control and also avoid the development of regional cliques that might challenge Beijing’s policies.

Since promotions and rotations are tied to economic performance, social stability, and adherence to party directives, local CCP officials are personally incentivized to “cook the books.” Having no local loyalties makes it easier, too, as officials rotating out have likely ignored festering long-term local issues in favor of inflating the numbers to achieve their short-term goals.

CONTRADICTING THE RHETORIC

In the face of the tariff war with the US, the NBS soldiers on with their statistics as part of the narrative that the CCP has things under control. For example, on 28 May state-run China Daily reported that China’s industrial enterprises with at least $2.78 million in annual revenue “saw their total profits jump 3 percent year-on-year in April, up from 2.6 percent growth in March.” This and other projected growth figures are attributed to “supportive domestic policy adjustments,” including “fiscal easing” and other unspecified monetary support from the central government.

The reality of these statistics is well stated here: “Macroeconomic data [reported by NBS for 2024] shows good news of growth consistently hitting targets: if that were the case, Beijing’s increasingly aggressive policy actions aimed at propping up the economy would not be necessary.”

There are other noteworthy contradictions to NBS’s numbers.

On 24 May, Nikkei Asia reported that “80% of Chinese banks have seen their interest margins fall below the industry threshold for profitability,” down 1.52% at the end of 2024 and a record low. This is not the sign of a healthy economy.

China’s economy is further threatened by deflationary pressures. As reported by Asia Times on 5 May, “producer prices have fallen for 29 consecutive months [with] March’s figures showed the sharpest drop in four months.” With the reduction is US demand, the Chinese have resorted to redirecting unsold exports to their domestic market at steep discounts, which is weakening earnings of export companies and putting pressure on them to cut costs (job layoffs).

From Radio Free Asia, the CCP’s Central Committee and State Council recently updated regulations on government frugality and waste prevention, focusing on “government spending, domestic travel, overseas business trips, official receptions, government vehicles, meetings, office space, and resource conservation.” Such belt-tightening is not indicative of a climate of robust and healthy economic growth.

Finally, China Daily reported that the People’s Bank of China (PBOC), the Chinese central bank, “injected 1 trillion yuan ($139 billion) into the market on [6 June].” This measure was advertised as “stabilizing the economy and spurring growth.” Left unexplained is why this monetary stimulus was needed given the standard 5% GDP growth estimated by China’s NDRC and NBS.

CONCLUDING THOUGHTS

Communist China has a history of cooking its economic books, as many local governments routinely inflate their statistics reported to the NBS. Current state-run Chinese media reports claim that the CCP’s economic management has blunted the impact of US reciprocal tariffs, and that the Chinese economy continues to grow at the projected 5% annual rate.

This narrative flies in the face of clear indications of economic distress as identified above. Deflationary pressures in China’s domestic market are the direct result of communist mismanagement of the economy and a desperate attempt to redirect exports to domestic consumption that in turn undermines the profitability of Chinese export companies resulting drastic cost-cutting measures – a death spiral. The pressures of reciprocal tariffs will continue to shine the spotlight on the CCP’s failures and elucidate the truth about the NBS’s statistics.

The end.

This article originally appeared in Stu Cvrk’s Substack. Reprinted here with permission

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