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How much can we trust China’s investment statistics?

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  • Fang Liu
  • Jun Zhang
  • Tian Zhu

Abstract

Building upon recent research into the underestimation of China’s official final consumption expenditure, this paper investigates the quality of China’s investment data. We strictly follow the official method to estimate the annual gross fixed capital formation (GFCF) expenditure from 2004 to 2012, and the resulting figures are significantly different from the official statistics. This implies that the ‘total investment in fixed assets’ data, which are the primary source for the estimation of GFCF, grossly exaggerate actual investments, and that the official GFCF figures are not, strictly speaking, independently estimated, as they are purported to be. We deduce that the official gross capital formation figure is more or less a residual item obtained by subtracting final consumption and net exports from the official GDP figure that is calculated based on the production-cum-income approach. As a result, the underestimation of China’s consumption expenditure automatically translates into overestimation of investment expenditure. We conclude that China’s official consumption and investment statistics cannot be trusted as the basis for policy discussions and academic research.

Suggested Citation

  • Fang Liu & Jun Zhang & Tian Zhu, 2016. "How much can we trust China’s investment statistics?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 14(3), pages 215-228, July.
    • Handle: RePEc:taf:jocebs:v:14:y:2016:i:3:p:215-228
    DOI: 10.1080/14765284.2016.1221606
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    References listed on IDEAS

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    1. Nicholas R. Lardy, 2011. "Sustaining China’s economic growth after the global financial crisis," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 235-239.
    2. Loren Brandt & Xiaodong Zhu, 2010. "Accounting for China's Growth," Working Papers tecipa-394, University of Toronto, Department of Economics.
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    Cited by:

    1. Lv, Bingyang & Liu, Yongzheng & Li, Yan, 2020. "Fiscal incentives, competition, and investment in China," China Economic Review, Elsevier, vol. 59(C).
    2. Wei Chen & Xilu Chen & Chang-Tai Hsieh & Zheng Song, 2019. "A Forensic Examination of China's National Accounts," NBER Working Papers 25754, National Bureau of Economic Research, Inc.
    3. Kevin Luo & Tomoko Kinugasa & Kai Kajitani, . "Dynamic Efficiency in World Economy," Prague Economic Papers, University of Economics, Prague, vol. 0.
    4. Kevin Luo & Tomoko Kinugasa & Kai Kajitani, 2020. "Dynamic Efficiency in World Economy," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(5), pages 522-544.
    5. Kevin Luo & Tomoko Kinugasa & Kai Kajitani, 2018. "Dynamic efficiency in world economy," Discussion Papers 1801, Graduate School of Economics, Kobe University.
    6. Lai, Pingyao & Zhu, Tian, 2022. "Deflating China's nominal GDP: 2004–2018," China Economic Review, Elsevier, vol. 71(C).

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