Opinion - A ‘tofu-dreg' edifice: Most of China's official economic data is probably fake

Yahoo

15-05-2025

China reported remarkable economic growth of 5.4 percent in the first quarter of 2025. Its growth is fascinating, since it far outstripped all large economies.
It is also noteworthy because it comes amid China's collapsing real estate bubble, stagnant growth in its second-largest export market (Europe), negative growth in its top export market (the U.S.), falling domestic population and deflation.
How did China achieve this miracle? The answer is simple — it didn't.
For at least a decade, China's growth story has been a triumph of propaganda and a testament to the willingness of lazy, gullible western journalists and institutions to accept it. In truth, whether we're talking GDP, economic growth, deflation or demographics, the official Chinese data is a tofu-dreg edifice that cannot mask China's severe underlying societal problems.
China's official growth statistics are reminiscent of Bernie Madoff's quarterly updates to his clients. For decades, the high-priced con artist delivered a stream of steady investment returns. Markets went up, markets went down, yet Madoff delivered with barely a hiccup. Investors and journalists thought he was a genius.
Yet his very consistency was actually evidence of fraud.
Likewise, the western media and financial establishment have swallowed whole the idea that China and its increasingly central-planned economy is a genius model that can do no wrong. China's claims that it hits or exceeds its growth targets over and over and over continue to be accepted at face value.
Even in years where it is impossible to fake a 5 percent growth rate, China's claims remain absurd. In the COVID year of 2020, China claimed over 2.2 percent growth, even as the world economy (despite including this likely-fudged Chinese data) shrank by nearly 3 percent.
Independent researchers have become wise to this fraud. Alternate measures suggest that China's economy may have declined in 2023, rather than grown by the government-targeted 5 percent. Research from the University of Chicago suggests that China's economy may be as much as 60 percent smaller than officially reported.
Even if one accepts Chinese data, a portion of the reported growth is economically useless. With overbuilt infrastructure and vast swaths of empty apartment buildings, China has embraced a version of Bastiat's broken window fallacy — where any type of economic activity, including construction of useless assets, counts the same as real or useful economic activity.
China and its ruling clique, the Chinese Communist Party, are continuing a long tradition of communist or socialist authoritarian nations faking economic statistics. Historian Tony Judt discussed this in his tome 'Postwar,' wherein he exposited on the bankruptcy of communist Eastern Europe, offering up decades of statistical claims later proven to be lies.
Clearly, Karl Marx left out fraud as a fundamental tenet of communism.
As bad as Chinese economic growth statistics are, China's population and demographic data may be worse. Although the economic data are presumed merely inflated to conceal slower growth, the population data likely conceal a demographic disaster that is gaining speed every day.
Dr. Yi Fuxian of the University of Wisconsin, an expert in China's demographics and prominent critic of that country's one-child policy, has been digging into the details of China's population claims — and what he has found is not good.
For starters, Yi believes that China's population is overestimated by at least 130 million — more than one-third of the U.S. population. In a recent monograph, Yi details the many discrepancies buried within China's current and past census data.
For example, China requires a tuberculosis vaccine for all newborns — data that allows researchers to cross-check the reported number of births. The data matched official birth statistics in 2009 and 2010. But by 2018, the 6.21 million reported vaccination doses implied at best 9.9 million births, far less than China's claimed 15.23 million births.
The 2019 and 2020 data had similar large discrepancies.
In another data point, China reported 13.79 million children under the age of one in 2000. Yet the 2010 census claimed there were 14 million 10-year-olds. But the magical appearance of a quarter-million children had expanded by 2014, when the number of ninth-graders (a direct analogue to age 14) was reported as 14.26 million.
At every level of China's government, there is every incentive to fake population numbers. Local governments are highly dependent on fiscal transfers from the central government. Higher populations mean more money.
Yet this research is not necessary to know that something is fishy in the Chinese data. China's fertility rate fell below replacement (2.1 children per woman) in 1991 and quickly fell further to 1.522 in 1998. After 1998, the data starts to look strange.
Fertility, we are to believe, stopped falling in 1998, despite ever rising wealth, education and urbanization — all factors directly correlated with lower rates of reproduction. In fact, the rate supposedly increased by more than 15 percent from its low in 1998 to 2012. This makes no sense. Not only is this rise completely counter to experiences throughout the world, it is strongly against what happened in culturally similar societies in East Asia.
Furthermore, China maintained its one-child policy through 2013. A fertility rate over 1.5 implies either a majority of women were having two children or a substantial number of women were having three or more children. And natural decrease has not been balanced by immigration — according to publicly available data, China has had a net outflow of migrants every year since 1960.
The gathering demographic erosion of China is not some historical curiosity. It implies a fast-aging population with less dynamism and an increasing social welfare burden. Shifting demographics removed Japan as an economic competitor to the U.S. in the 1990s, and the same dynamic is at work against China. China's average age is already higher than that of the U.S.
China remains a dangerous county. American officials and President Trump must understand that opening up China to U.S. exports is not a very good trade-off. Increasing demographic and economic pressures are likely to make China more aggressive in the near-term.
Auguste Comte once said; 'Demography is destiny.' For China, that destiny — aging and economic atrophy — is here, and it is a serious problem for China and the world. But determining how to handle it requires an embrace of facts over official fictions.
Keith Naughton is co-founder of Silent Majority Strategies, a public and regulatory affairs consulting firm, and a former Pennsylvania political campaign consultant.
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