The China GDP paradox

Lets put some data first. Given below is the provincial GDP growth rate of Mainland China as published in the China Statistical Yearbook by the National Bureau of Statistics of China

Do you see anything surprising?

Region Share of 2010 2009
GDP 2010 (%) growth (%) growth (%)
Mainland China 100 10.3 9.2
Guangdong 10.51 12.2 9.7
Jiangsu 9.45 12.6 12.4
Shandong 9.11 12.5 12.2
Zhejiang 6.29 11.8 8.9
Henan 5.3 12.2 10.9
Hebei 4.67 12.2 10
Liaoning 4.22 14.1 13.1
Sichuan 3.91 15.1 14.5
Shanghai 3.9 9.9 8.2
Hunan 3.67 14.5 13.7
Hubei 3.65 14.8 13.5
Fujian 3.32 13.8 12.3
Beijing 3.18 10.2 10.2
Anhui 2.83 14.5 12.9
Inner Mongolia 2.69 14.9 16.9
Heilongjiang 2.37 12.6 11.4
Shaanxi 2.32 14.5 13.6
Guangxi 2.2 14.2 13.9
Jiangxi 2.18 14 13.1
Tianjin 2.1 17.4 16.5
Shanxi 2.1 13.9 5.4
Jilin 1.98 13.7 13.6
Chongqing 1.82 17.1 14.9
Yunnan 1.67 12.3 12.1
Xinjiang 1.25 10.6 8.1
Guizhou 1.06 12.8 11.4
Gansu 0.95 11.7 10.3
Hainan 0.47 15.8 11.7
Ningxia 0.38 13.4 11.9
Qinghai 0.31 15.3 10.1
Tibet 0.12 12.3 12.4

Lets say you have two numbers a and b; and you want to find the average of these. The average will always lie within a and b, not outside it. Now look at the numbers again, the provincial growth rates. While the aggregate growth rate for Mainland China is 10.3% and 9.2% in 2010 and 2009 respectively, the growth rates of the constituent provinces are almost all greater than the aggregate growth rate.How is that possible? How can the growth rate of the whole be less than the growth rate of the parts? Its a mathematical impossibility.

Well the yearbook explains it away thus : ” Since the GDP is calculated separately by the state and local governments, the sum of data of different regions is not equal to the national total amount.”

That sounds a little dodgy at best. However, the explanation is far simple. You see, local officials, in their over eagerness to show better growth in their areas, fudge with the data resulting in such absurd figures. It is hoped however, that the National Bureau of Statistics of China does collect and report real national level data and the aggregate figure is a accurate representation of the real situation on the ground.

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3 thoughts on “The China GDP paradox

  1. Good article Jobs-your recent article writing spree has not lead to decline of quality.
    But am a bit surprised at the topic-I did not think Fin was your Forte. Shows we all can be surprised at times

    • haha.. I am flattered. Well other than this and the one on Apple fanboys, the last 5 articles were all for the CCR course. It was a academic requirement 😉 And yes, Fin ain’t my forte. But I like Econ stuff and most of the courses I have taken this sem are either on Econ or Strategy or technology, all things I like 🙂

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