China Is Overstating Its GDP | My Reaction: Yes It Is!

A video from Money And Macro discusses how China is overstating its GDP by at least 60%. Could be very true, but here is what matters for us investors.

0:00 China Overstating GDP
1:47 Night Lights
3:47 Overstating GDP
6:28 Show Me The Money

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[Aenion]

I like it when my favorite channels discuss the same topics and balance each other out

[MoneyMacro]

Hey Sven,

Thanks for taking a critical look at this. I think a back and forth of arguments is really important.

In that spirit, some comments on your comments:

- The problem with the Li Keqiang index is that they include bank loans. It is well known that bank loans grew much faster than GDP in China (and in other countries). So, if you include for 40% something that grows much faster than the economy (causing a bubble) with something more tangible (electricity and rail freight), then it makes sense you end up with an average number close to official GDP.

I'm not sure what most of the individual statistics can tell us much about GDP. Specifically.

- Starbucks stores grew. Yes. China's economy grew tremendously. Everyone agrees. The disagreement is on how much.
- oil imports are more for China (that is because it produces less oil). I think you should look at oil consumption instead. There China consumes still quite a bit less than the US. But, not 60%. This might have to do with the following:
- Some of the individual metrics such as commodity imports and CO2 are problematic because China's model has been to become the factory of the world. So, it makes sense that these metrics grew faster than the overal economy. Similarly to how an economy based like the Netherlands might rival the U.S. in farm exports. While, still everyone knows it is a much smaller economy.
- Mexico car calculation is interesting. But, could also be distorted because China had rapid growth. Mexicans keep driving in older vehicles longer?
- Apple iPhone example. Doesn't say much. E.g. US is double of Europe. But, this is more likely a reflection of higher market share of Apple in USA. Similar dynamics make this a bad proxy to learn about China's economy.

On your overal conclusion, I would agree. Even if China's GDP growth was much higher, there might still be great investments in China. And yeah in general, even though the two fields are related, economics and investment are different fields.

So, very happy to see an investment channel like yours shining a light on that part of the discussion.

Cheers!

Joeri

[elrevesyelderecho]

Excellent research video. You have the starting point for a future paper.

[SGETjome]

Sharp analysis underlined with great facts! Thx for your content. Really hard to find elsewhere out there

[pieromalutta]

Sempre ben druze Sven, grazie per il servizio

[MakMak-yuxm]

young Carlin is growing... aspettiamo aggiornamenti on the platform👍

[mikestanmore]

I'm glad you looked at this, thanks Sven.

[jcyxofp]

This video has great value. Follow the money!!

[pilarguerrero]

Thank you so much for the clear explanation. It makes sense to me.

[bananaboyTS]

been waiting for this video lol. very enlightening, thought a lot about this topic

[jonscr]

OMG... Little Sven in the background. Adorable!

[manos]

According to my most important economic indicator "hamburger consumption per capita" Chinese GDP is smaller 100 times than its actually stated! Trust me, i am an academic economist!

Another beautiful video Sven. One useful life lesson that applies to this situation, is that correlation doesn't imply causation.

[mrescape]

Very intelligent explanation. I am happy that i subscribed your channel and getting quality insights. Keep up the great work!

[phvaessen]

Great critical analysis!
If you inflate the annual growth every year during a long period (for instance +10% instead of 5%, during 15 years, the difference would be 418% instead of 208% ). The difference would be easily observable by many factors. As you suggested here : Oil imports, food consumption, level of goods exported, cars bought per capita for comparable GDP per capita economies, etc0
You can cheat a few years, but not for a long period.

[jhonnyfromme]

This is a good video on how Governments manipulate economic numbers! Thanks, good video.

[marcoaraujo]

Great One Sven Congrats! You reminded me of the "Big Mac Index" for inflation.

[rahulchahal]

In addition to lights add data from exports & imports to verify size of GDP

[ddurden]

Bellissimo video, uno dei migliori. Complimenti Sven

[sheanathan]

Great rebuttal. You deserve tenure Sven

[jeremynewell]

"Everyone is overstating" Fascinating!