Is China understating its GDP?

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Since 2022, two data sources on China’s goods trade balance have diverged substantially. The data on the goods trade balance published by China’s Customs Administration has been $189bn larger than that published by SAFE on a BoP basis in the last year alone. Many, including us, have argued that the Customs trade balance seems closer to the truth than the SAFE/BoP data, and that capital flight has been understated as a result. If that is indeed true, it must also mean that GDP has been understated, as BoP data is used to calculate the “net exports” part of GDP. The potential adjustment here is worth around 0.3% of 2022-2024 GDP.Our point here is not to argue that China’s GDP has been understated, but rather to add nuance to the debate about the discrepancy between Customs and BoP goods trade. GDP is, after all, probably more politically important and sensitive than capital flight, and therefore highlights the conflicting incentives surrounding the data.Chinese goods trade from two angles - an update on the Customs-BoP goods trade discrepancyIn the past few years, the size of China’s goods trade balance has been a source of controversy. The data published by China’s Customs Administration shows that the goods trade balance has been $96bn per month on average in the last year. The data published by the State Administration of Foreign Exchange (SAFE), however, suggests that the trade balance has been around a fifth smaller, at $80bn/month in the last year.The scale of the discrepancy has been declining in the last year, from a peak of $23bn 12mma in June 2024 to $16bn in the tw…