China Has Been Overstating its GDP Growth… Who Would have thought?

You know my position on China by now. It has over-expanded, urbanised too rapidly and, has excess capacity in everything from empty condos to cement factories. It is the epicentre of the greatest and most global bubble in modern history, and it will fall the hardest.

Clueless economic predictions that China will soon overtake the US economy are as stupid as the projections that Japan would do the same in the late 1980s, before that country crashed and burned after over-expanding…

And Japan’s demographic spending trends peaked in 1996, and China’s already in 2011. How could economists miss something so big, important and obvious?

Now there’s finally been a great study at the University of Hong Kong by four economists. Guess what? China’s been systematically overstating its GDP growth…who would have thought?

These economists studied all the hard data like satellite images, electricity consumption, railway cargo and merchandise exports. They calculate that GDP has been overstated on average by 1.7 percentage points, or cumulatively by about 20% — and the growth has also been far more volatile…duh! You notice how gradual and steady their slide has been with the trade war and slowing global growth? Sure, that could happen.

With the official numbers, China’s 2018 GDP was $13.4T (trillion) versus the US at $20.5T — 65% as large.

China would not surpass the US in total GDP until around 2036

By these new estimates, it’s $11.1T, or 54% as large. Worse, their GDP per capita is officially $9,800 versus $63,000 for the US, only 15.6% as high. But this new research says it’s $8,000, or a mere 12.7%.

China has pockets of near-Asian Tiger income in cities like Beijing, Shanghai, Guangzhou and Shenzhen, but most of the country is still poor. It’s still a middle-of-the-road, third-world country, damn it!

At current real average growth rates of about 4.7% versus 2.1% for the US, China would not surpass the US in total GDP until around 2036…I think with the bigger setbacks ahead, even later, 2040-plus.

They calculate it would take until 2076 to surpass in GDP per capita…

Not going to happen by my estimates as urbanisation will peak by 2040–2050. I see $27,000–$30,000 more likely at its peak, still less than 50% of the US today and borderline developed country at best.

I’m even more firm in my conviction of that assessment after this week.


Harry Dent,
For The Rum Rebellion

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