How rich is China and how fast has the economy grown? Statistical controversies

Correctly measuring a country’s national income and its growth is essential to the understanding of various aspects of the country’s economy both at present and in the future. The measurement issue is even more important for economies like China whose size-based economic-political power is always important to the world, but whose statistical system is less transparent and more non-standard because of the strong influence of the Marxian material product system (MPS) developed during the central planning period. Therefore, as the Chinese economy rapidly develops and integrates into the world economy there is a growing interest in a reliable and internationally comparable measure of China’s real income or gross domestic product (GDP) and its growth performance. The first controversial issue is how should China’s per capita income level be measured on an internationally compatible basis? The debate began in the early 1990s with the question ‘How rich is China?’ raised by Garnaut and Ma (1992) based on their study on the relationship between China’s food consumption and per capita GDP, and the GDP estimate for China by Summers and Heston (1991) based on the expenditure purchasing power parity (PPP) approach. The second controversial issue is how fast has the Chinese economy grown particularly since economic reform began in 1978. While the official estimate of about 10 per cent annual growth rate for the reform period is almost taken for granted, some researchers insist that this could have been overestimated. This paper reviews recent major studies on China’s national accounts and growth performance, evaluates alternative estimates of China’s national income and growth rates, and discusses their implications. Its main objective is to improve the understanding of these alternative estimates based on different approaches.