China’s whacky GDP

Here’s a little follow-up on the Chinese GDP numbers.

The growth figure produced by the National Bureau of Statistics (i.e. that 9.1% number) is growth in real terms, not nominal terms, one point that some people get confused every now and then.  The nominal yoy change for Q3 GDP was actually 21.3%.  That would mean that the implied GDP deflator yoy change is about 11.2%. Yet CPI inflation is only 6.1%.

That’s right, things don’t add up for Chinese Statistics.  The charts below show Real vs. Nominal growth of the Chinese economy, as well as the GDP deflator vs. CPI inflation.  As you can see, CPI inflation has been consistently below the inflation rate as implied by the implicit GDP deflator (as implied by the gap between nominal growth rate and real growth rate) for the past 10 years or so.  On top of that, the gap between the GDP deflator implied rate of inflation and rate of CPI inflation has been widening of late.

There are a few possible explnantions.  Either the basket of things for the GDP deflator is so different from that of the consumer, such that prices in the GDP basket, possibly more geared towards fixed asset investments, are rising much more rapidly than consumer prices, which is not impossible.  Or else, it signals that consumer price inflation is actually much worse than the official CPI data suggested, which is also not impossible.  Or indeed, both are happening.

Another curious thing is that even though growth in real term has been slowing, growth in nominal term is actually accelerating, and that would be largely due to rising inflation.

Latest posts by __ADAM__ (see all)


  1. That is indeed wacky.

    BTW what deflators do Australia and USA etc. use? i.e. do they deflate GDP data with the CPI? In other words if the Chinese were not deflating with the CPI would that be considered unusual practice?