The Economics of Lying About GDP

China’s economic record is like Lance Armstrong’s cycling record: yes, the best, but with a big fat asterisk. There’s a paradox among cheaters: they usually are among the best in their field, because only when you get close to the top does breaking the rules make you the best in the world.

We have plenty of evidence for this:

• Regional GDPs have been restated, sometimes significantly. (Even before the restatements, provincial GDP estimates literally didn’t add up to the reported national figure.)
• Chinese sales tax numbers indicate growth rates approximately 1.7 points below the official numbers for 2008–2016.
• China’s then-deputy prime minister, Li Keqiang, didn’t trust his own numbers, and made up his own economic index based on bank loans, rail cargo, and electricity consumption. It is, inevitably, a Bloomberg function, so you can get real Chinese GDP data for $25k a year.

But clearly China’s economy has grown. The numbers may be fudged, but this is hard to fake:

Why bother fudging? Is it really unimpressive for China to grow at 6.5% rather than 8%? Is it worth the risk?

One possibility is that the answer is yes: it’s prudent for a growing country to exaggerate its pace of GDP growth, at least for a while.