Something ‘funny’ happened to China’s reported GDP growth numbers around five years ago, they became more volatile. As you can see, so too did numbers from the rest of the world but in China’s case the discontinuity is stark (look for red along the bottom and on the right).
The smoothness of the series prior to this is a major reason observers have doubted it’s accuracy. No economic series in the real world should be that well behaved.
Researchers at the U.S. Federal Reserve have subsequently taken a closer look at the series and come up with a surprising conclusion: “..recent GDP growth figures, which have been in line with the stated target, appear to align closely with broader Chinese economic indicators and do not appear to be overstated.”
The research goes on to look at how property problems aren’t retarding growth. No doubt they’re impacting consumer sentiment but since the pandemic a surge in demand for Chinese goods and a turn inwards to focus on higher value added products, like EVs, has kept industrial production humming. You can see the trends clearly below.
The researchers sign off with a note of caution: “Growth over the past years received a big boost from net exports as real exports surged and real imports were flat. That is unlikely to be sustained, especially in the face of rising trade tensions. Moreover, with many manufacturing industries already suffering from overcapacity, there are limits to further increases in investment. As such, to maintain 5 percent growth going forward, China will need to strengthen consumption. The government’s recently announced plan to boost consumption indicates a recognition of this need.”
What I’m reminded of looking at this analysis is how proactive Chinese planners are. This is especially worth bearing in mind with reference to consumption. If they want this to happen, as it seems they now do, it’ll happen.
Happy Sunday.
[Citation: Barcelona, William L., Danilo Cascaldi-Garcia, Jasper J. Hoek, and Eva Van Leemput (2025). “Is China Really Growing at 5 Percent?,” FEDS Notes. Washington: Board of Governors of the Federal Reserve System, June 06, 2025, https://doi.org/10.17016/2380-7172.3784]