Beijing knows it has a credibility problem

Ten years ago this week, Rhodium Group published a landmark study of China’s economic data, Broken Abacus, discussing the rapid evolution of China’s statistical system from its Soviet foundations and its continued shortcomings relative to developed economy peers. The study introduced the problems with China’s statistics as follows: “Consider two facts about China: First, the consequences of China’s size and performance for the rest of the world are increasingly great, and second, confidence about the accuracy and precision of standard measures of China’s economic size and performance is low and constantly diminishing.”

Plus ça change. The problems with China’s economic statistics that were readily apparent in 2015 are even more obvious now. Throughout the past decade, Rhodium Group has been one of the most publicly outspoken critics of the credibility of China’s economic data, arguing that the slowdown in China’s economy has been far more severe than Beijing’s statistics have indicated. China’s official GDP data showed the economy barely slowing to 3% growth in 2022 before recovering to an implausibly steady pace around 5% every year since, with growth even picking up slightly from that pace so far in 2025 (Figure 1).

The economic reality in China is far bleaker, given that the property sector has collapsed since 2021 and nothing has replaced it as a driver of growth. The zero-COVID restrictions severely limited economic activity in China in 2022 and the broader economy likely contracted that year. Since 2023, consumption growth has remained anemic, credit growth has slowed, and the economy has been struggling with persistent deflationary pressures in both producer and consumer prices. Weak domestic demand has turbocharged China’s trade surplus, as excess production in Chinese industry is sold abroad at lower prices.

These two facts—the Chinese economy is slowing sharply, and Beijing knows that its economic data are not credible—raise important questions about how China is currently presenting its economic performance, and how the world should respond to China’s official narrative. What are the incentives for Beijing to present China’s economic data as stronger and more stable than the economy’s real performance? What are the political obstacles to portraying China’s economic growth as weaker, even if slower growth is necessary in the course of reform? Why could Xi Jinping not simply hold a press conference, claiming that China’s economy had faced more serious trouble with slower growth or recessions in the past, but that the leadership had a plan to fix this and recovery was on the way? After all, Xi Jinping faces no practical obstacles in making this hypothetical announcement, and no one in China would stop him from doing so.

Admitting mistakes is always difficult, but acknowledging economic reality may help Beijing by blunting political momentum in other countries for economic measures targeting China, while strengthening the case for reform internally. It would also allow China’s leaders to present the economy as recovering from a tough period during the pandemic, rather than inevitably slowing from the growth rates of the 2010s. So why does Beijing insist upon claiming that GDP growth will be 5% every year, even as they know that this claim will become less and less credible every year that they do so?

Inertia and ideology

The answers to these questions may seem obvious, but they are not. Some of the benefits of claiming strong and stable economic growth are straightforward. Fast economic growth confers both domestic and international legitimacy upon the Chinese Communist Party’s governance. The perception of a growing domestic market helps attract foreign capital to invest in China and buy Chinese financial assets. Strong perceived growth may also discourage capital outflows by Chinese citizens, if Chinese growth is seen as faster than elsewhere in the world. It helps companies in China and the rest of the world to see China’s own market as the source of future growth. In diplomatic contexts, the perception of a growing economy helps China’s leaders to argue that China’s power and influence will only expand further in the future, so that it makes it easier for them to argue for China’s positions today. One of China’s most important messages in its external propaganda is that China’s global rise is inexorable.

Internally, China uses GDP targets to anchor expectations and incentives among lower-level officials. Because GDP targets are seldom adjusted, changing them even incrementally (from 5% to 4%) would change political priorities of local officials regarding the importance of maintaining output (and employment). Local authorities do not really care whether China’s actual growth rate is 1% or 7%. But they would change their policy objectives if Beijing indicated even a minor adjustment in the targeted growth rate, higher or lower. And there are several academic studies that explain how local government data reporting can influence national-level statistics, despite Beijing’s insistence to the contrary. All of this argues against dramatic changes in China’s publicly reported economic data, or significant changes in targeted growth rates.

Part of the reluctance to revise the GDP data or legitimize any questions about its accuracy is analytical in nature: Beijing does not have a second set of economic books. Certain data series that are collected internally are likely available exclusively to China’s leaders or policymakers, but there is no hidden GDP growth rate in Zhongnanhai that the leadership uses for its own policy decisions, while releasing the official data to the rest of the world. Compiling tables roughly consistent with Systems of National Accounts (SNA) standards is an arduous process, and it is highly unlikely to be duplicated in China with two sets of statistics operating in parallel. As a result, actual economic growth may be slower than official data suggests, but the leadership probably has no idea exactly how much slower. Hence if Beijing were to open the door to criticism of the data, they would have no obvious response to the next logical question of how much weaker economic growth had actually been in recent years, or how much smaller China’s economy would be as a result of adjusting the data.

Other objections to revising the data series may be ideological in nature. Xi Jinping has argued that as the world is currently in the process of “changes unseen in a century” and in the context of these changes, “the East is rising and the West is declining.” In a Leninist political system where this ideology is directed from the top leadership, there may simply be no economic official willing to offer a view that perhaps China’s economic rise has stalled, which would challenge the leadership’s ideological line. In addition, Beijing has a consistent political commitment to the idea that Communist rule means stability in all aspects, even at the cost of innovation and efficiency. But ideological commitments are flexible, and propaganda can work around them as well, or reverse course. If there were political benefits to the leadership in changing the presentation of China’s past economic data, ideological constraints are unlikely to be insurmountable obstacles.

Economic data in US-China strategic competition

There are both internal and external constraints on China presenting a more realistic picture of its economic performance. Internally, questioning economic performance may raise questions among Party members about the competence of Party leadership, creating conditions for factional infighting. Hence there is always a strong incentive not to revise past economic data, as the revisions might raise questions about the Party’s governance.

Externally, of course, is the importance of economic growth within strategic competition with the United States. As we argued in Broken Abacus a decade ago, “Attempting to compare growth rates played an even more sensitive role in the twentieth century because of the Cold War struggle between the fundamental ideas of market capitalism and Soviet communism. Economists were motivated by the goal of comparing rival systems to understand their nature and potential for growth.“

In the context of US-China economic competition, China’s capabilities vis-à-vis the United States have been expanding over the past decade, underpinned by economic growth. To change the past and admit that China’s growth has been weaker would change the future competitive landscape as well: Beijing would essentially be admitting that China had no plausible path to global economic primacy.

That realization by itself would have no impact on China’s current capabilities, of course. But a perception that China’s economic future has a hard ceiling, and Beijing’s inevitable rise in power and influence has ended would have significant effects on how other countries would react to China even today:

• If there is no long-term domestic demand growth in China—and Beijing is aware of that fact—then continuing an investment-led growth model is more transparently a beggar-thy-neighbor trade policy involving the export of excess production at lower costs.
• Derisking from China and diversification of global supply chains would accelerate. Multinational businesses operating in China would be less likely to push back against their home governments imposing export controls, tariffs, and other punitive measures targeting Beijing, because China’s domestic market would be less important for their future business prospects.
• Countries would be less willing to use China’s financial and economic infrastructure, such as international RMB payments, if they thought both that China’s infrastructure would become less important in the future, and that aligning with Beijing might expose them to US sanctions or other controls.
• Countries would become more willing to enforce US sanctions and comply with export controls targeting China because of the perceived importance of the US market and the dollar-based financial system. Conversely, if China was seen as becoming far more economically influential over time, more countries may be willing to risk losing access to US markets to continue doing business with Beijing.
• Commodity exporters may become less willing to offer Beijing long-term contracts to supply energy and critical materials, because of concerns that Beijing may not be able to fulfill them given its weakening economy, or to avoid antagonizing Washington.
• China’s persistently rising defense spending relative to stagnant fiscal revenue growth and economic growth would be seen more transparently as aggressive in intent rather than as a modernization consistent with a growing economy.
• Countries would become less willing to accept Chinese investment in their economies if there were new concerns about the economic viability of the companies driving those investments, and if the investment might result in greater exposure to US economic statecraft tools.
• In bilateral diplomatic negotiations with China, countries would be more willing to press their own advantages relative to Beijing, given that China’s leadership would have acknowledged the extent of economic stress they were facing domestically, offering other countries options of pressuring China’s pain thresholds.

In short, China’s narrative of strong and stable economic growth propelling China to eventual global economic primacy, underpinned by the official economic data, offers strategic benefits to Beijing as a tool in strategic competition with the United States.

In the absence of that perceived long-term growth trajectory, derisking of global investment and manufacturing supply chains from China would likely accelerate. Beijing would have fewer tools to combat diversification of global supply chains away from China as well. These narratives concerning the acceleration of derisking or decoupling are powerful in themselves, as multinational companies will often react to actions by their peers when they make commitments to redirect investments. If China is perceived as a fading economic force, corporate decisions to shift investments and capabilities elsewhere could accelerate China’s economic downturn, a vicious cycle for Beijing.

All of this explains Beijing’s commitment to the economic narrative of a China rising in economic strength and capabilities. But even within that context, the talking points can change. Over the last two years, Beijing seldom brings up its own GDP growth as a comparative asset to the United States—the focus is instead on China’s dominance of advanced technologies, such as electric vehicles or industrial robotics. The models developed by DeepSeek were advertised as new evidence of China’s capacity for technological innovation. At the National People’s Congress in 2025, in a planted question from state media about DeepSeek, Foreign Minister Wang Yi commented, “Recently, China’s scientific and technological innovation has more than once defied people’s imagination. From breakthroughs in atomic bombs, missiles and satellites decades ago to the Shenzhou space missions and the Chang’e lunar exploration program, to 5G, quantum computing and DeepSeek, generations of the Chinese people have never stopped in their endeavor for innovation. And we are witnessing an ever-expanding horizon for China to become a science and technology powerhouse.” Focus on dominance of certain manufacturing supply chains—such as rare earth minerals and magnets—is another element of Beijing’s indirect comparisons of its capabilities relative to the United States, rather than a straightforward argument that China will become the world’s largest economy in the future and the world should prepare for that fact. If China could make that claim credibly, Beijing undoubtedly would do so.

The Trump administration has assisted Beijing’s efforts to change the subject from systemic economic competition with the United States as well, by unceremoniously removing the non-political Commissioner of the Bureau of Labor Statistics following employment data that suggested a weakening US labor market. Over the last three years, Beijing has struggled to push back against the global perception that China’s economy has stalled since zero-COVID restrictions and the collapse of the property sector, while the US economy powered ahead, recovering from the pandemic more rapidly than any other member of the G7. Weakening the credibility of the US data that support that narrative is a strategic mistake with implications for US national security, well beyond esoteric arguments about the accuracy of statistics. If Beijing can credibly argue to global investors and policymakers that the US agrees that its own statistics are politicized, it helps China to maintain the narrative of its own inevitable rise, while also pushing back against global derisking or decoupling from China.

Thinking about authority bias, again

In our review of China’s economic performance in 2024, we argued that “authority bias” was a critical enabler of China’s preferred economic narrative. China releases plenty of economic data series. Only a small proportion of them actually suggest strong and stable economic growth. Beijing itself is responding with policy measures that suggest growth has actually been much slower and short of the official targets. Highlighting and crediting Beijing’s preferred economic data sources over other series that show China is facing sustained deflationary pressure, falling domestic demand, and slowing investment growth is a choice. In the context of systemic and strategic competition as the global economy is being restructured, that choice has political implications as well.

International financial institutions and organizations such as the International Monetary Fund (IMF), the World Bank, and the Organization for Economic Cooperation and Development rely upon China’s official economic data to conduct their own analyses and make forecasts of China’s economic growth. But when there are clear discrepancies between the actual performance of China’s economy and the officially reported data, the official data always win out in the absence of a credible alternative.

Not all macroeconomic data are being reported and calculated to gauge actual economic performance or in line with international standards, and evaluating them as such is also a political choice. Beijing is going to continue arguing that it has faced no meaningful economic slowdown despite a collapsing property sector and that its system continues delivering, despite clear reversals in market-oriented reforms. The question for the rest of us is whether to take that message seriously.

The clearest demonstrations of this political messaging from Beijing can be seen almost every year in the official responses of Chinese officials to the IMF’s Article IV reports. Last year, Zhang Zhengxin, the Executive Director for China at the Fund, argued in his official statement (our italics), “Considering these factors, our projections for China’s growth in 2025 and in the medium term are more positive than staff’s view. China still has ample macroeconomic policy space and has the capacity to support sustainable economic growth. For the foreseeable future, China will remain an important engine of global economic growth. . .To this end, we recommend that staff conduct a full analysis of the upside factors in China’s economic growth to make a reasonable judgment of the medium-term growth path for China’s economy. This will also help to reinforce confidence in global economic growth.” This was China’s official response to the IMF’s medium-term forecast of 3.3% real GDP growth by 2029.

In 2023, China’s official message in response to the Article IV report was similar, chiding the IMF staff for underappreciating China’s fundamental strengths (our italics): “In short, compared with the staff’s view, we hold a more positive view of China’s economic growth in 2024, as well as in the medium-term. China will continue to be the vital engine of global economic growth. The staff’s more appropriate forecast of China’s economic growth prospect will help stabilize the confidence both at home and abroad in China’s development and global economic growth. In view of this, we suggest that the staff should study carefully and consider reasonably the medium-term growth trend of China’s economy.”

In 2022, China’s official message explicitly linked China’s long-term political objectives for its economy to the IMF’s forecasts, claiming (our italics), “The 20th CPC National Congress has outlined China’s overall development objectives for 2035, including significantly increasing its economic power, improving its scientific and technological capabilities, and enhancing its comprehensive national strength, so as to reach the per capita GDP of mid-level developed countries by 2035. In this context, we think staff’s projections of China’s growth in 2023, 2024, and in the medium- to long-term are overly pessimistic.”

These explicit messages to the Fund staff are only one set of examples where China attempts to push back against any public message that the economy will slow even marginally from targeted rates. The IMF’s forecasts of a large economy slowing to 3.3% growth are hardly apocalyptic. But they differ distinctly from Beijing’s political narrative, and therefore must be corrected publicly. China’s official messages call for the staff to make “reasonable” and “appropriate” forecasts, and anchor the importance of those in the need to promote confidence in China’s economy and the global economy. The fact that China might not be able to achieve Beijing’s politically dictated objectives for its economy—which is the current reality of China’s economic performance—cannot be discussed, or should be considered subordinate to the goal of promoting confidence.

The official economic data will confirm Beijing’s political message of its system’s superior performance over Western economies, this year, next year, and in the following years. Understanding the political stakes that Beijing attaches to its own preferred economic narrative in the context of US-China strategic competition is the necessary context for any organization to evaluate the reliability of China’s economic data, and it is one reason we have been willing to publicly highlight the discrepancies between China’s data and economic reality.