"China’s national accounts are based on data collected by local governments. However, since
local governments are rewarded for meeting growth and investment targets, they have an
incentive to skew local statistics. China’s National Bureau of Statistics (NBS) adjusts the
data provided by local governments to calculate GDP at the national level. The adjustments
made by the NBS average 5% of GDP since the mid-2000s. On the production side, the
discrepancy between local and aggregate GDP is entirely driven by the gap between local and
national estimates of industrial output. On the expenditure side, the gap is in investment.
Local statistics increasingly misrepresent the true numbers after 2008, but there was no
corresponding change in the adjustment made by the NBS. Using publicly available data, we
provide revised estimates of local and national GDP by re-estimating output of industrial,
construction, wholesale and retail firms using data on value-added taxes. We also use several
local economic indicators that are less likely to be manipulated by local governments to
estimate local and aggregate GDP. The estimates also suggest that the adjustments by the
NBS were insufficient after 2008. Relative to the official numbers, we estimate that GDP
growth from 2008-2016 is 1.7 percentage points lower and the investment and savings rate in
2016 is 7 percentage points lower."
