Reassessing China's GDP Growth Performance: an Exploration of The Underestimated Price Effect

Instead of searching for alternative indicators, this study accepts the official nominal GDP statistics at face value and reassesses real growth by investigating the underlying price effect that is intrinsic to and coherent with the national accounts. Based on reconstructed national input-output tables in time series, we address two major biases that may have significantly distorted the official growth estimates of China, i.e., a single-deflation bias caused by discrepancies between input and output prices and an aggregation bias that is caused by a constant-price value aggregation problem. Compared to the smooth official growth rates, our procedures have exposed more volatile movements of, and greater impacts of external shocks on the Chinese economy. We estimate an annual growth rate at 8.3 percent for the entire reform period 1978-2018, which is 1.2 percentage points below the officially claimed rate of 9.5 percent. In real terms, this downward adjustment means that until 2018, China's accumulated national income over the past forty years could be 36 percent smaller than that suggested by the official data.