My shocking discoveries while recalculating China and U.S. GDP

China's GDP has been a guessing work for everyone involved. Those who report and track it were guessing. And those of us on the receiving end of the data are also guessing its authenticity. Everyone knows China's GDP numbers aren't real. In April 2023, I did a program on China's GDP in which I said China's GDP was between 5.7 to 8 trillion U.S. dollars, which was about a third to a half of the stated 17 trillion dollars. Well, I decided to take another look at the subject. What I found was shocking. All right, so I found that I was too conservative in my previous work. China's GDP is less. I found that the world's two largest economies have been engaged in a fierce battle over GDP numbers. Both have been playing with numbers. The truth is this. China's economy is much smaller than it wants the world to believe. And the U.S. is not as wealthy as it seems. What I first did was looking at the growth rates of China's GDP. And I narrowed down the time period from 1992 to 2023. Prior to 1992, China used Soviet-style material product system or MPS to track national production. And so in 1992, China adopted the SNA or systems of national accounts. This new system allowed China to align its GDP calculations with international standards. And so that's the beginning of my analysis. So the first thing I did was listing China's GDP and its annual growth rate. All the data that I used today came from the World Bank's data. So I calculated China's GDP based on the growth rate and then compared that to the official GDP. And there's a huge discrepancy. So the orange column that I highlighted is a calculated GDP. It's just taken by 1992 GDP and multiplied by the annual growth. And then towards the end of the year, the calculated GDP is three times more or two times more than the official number. So if you zoom in to look at 2023, official GDP was $17.78 trillion. But the calculated GDP was only $5.7 trillion. That got me puzzled. So why is there such a mathematical discrepancy between the official GDP and then the calculated GDP based on the official annual growth number? And the annual growth number isn't an average annual. It's the yearly growth number. So I decided to do the same calculation for the United States, applying the real annual growth rate to the previous year. And to my surprise, I found that the United States also has a big discrepancy. For 2023, instead of the official GDP at $26.7 trillion, I came up with half of that at $13.27 trillion. So this got me puzzled. So I started plotting the data in a chart. So this is China's GDP trend in the past 32 years. The orange line is the official GDP, while the gray line is my calculated GDP based on real annual growth numbers. And you can see there's a big discrepancy. I highlighted the year when China joined WTO, and that's in 2001, and the year Xi Jinping took over as the top CCP leader. That was 2012. Just to give you some reference points, as you can see in 2002, the gap was about 40%. $1 trillion versus $1.4 trillion. And then in 10 years, by the time Xi Jinping came to power in 2012, the gap was 187%. And then by 2023, the gap is over 200% and is $12 trillion. Now, let's take a look at the US. It's the same chart for the US. The orange line is the official GDP, and the gray line is the calculated GDP. And there are two turning points. Before 2006, the gap was below 35%. And then after 2006, the gap or the discrepancy steadily widened. In 2020, it took off. And now there's a 100% difference, meaning that the official GDP is twice the calculated GDP. So that got me really thinking, and I decided to do some analysis for all top economies of the world. So here's the chart for Japan. As you can see, Japan's actual and official GDP trend were in a zigzag pattern. In some years, one is over the other, and in some other years, they were in the opposite. Overall, the two lines are not too far off and are in the same direction. And now let's take a look at Germany. Germany, the two lines are almost perfectly in sync. They're identical. And then I looked at India, similar. They're very, very close. India's official GDP in the last couple of years is actually lower than the calculated ones. And then the United Kingdom is almost in sync with some movements, but they are within 10% of the margin. And then last but not least, France. They are almost identical. I could say they are actually identical. So when the two lines are in sync, it means that the countries announced GDP matched with the growth rates. In the case of China and the United States, the official GDP reflected higher growth rates than the announced ones. So why is that the case? I started to look at the reasons for the discrepancies for China and the U.S. There are two reasons. One is inflation rate. So inflation or deflation is one of the reasons that GDP growth are adjusted to reflect inflation or deflation. Exchange rate is another factor, especially for China. If the GDP grew but exchange rate appreciated more than the dollar, its GDP measured in U.S. dollar would grow even more. But that's the case for China, but that shouldn't be the case for American GDP because it's measured in its own currency. And also, even if we factor in inflation or deflation or exchange rate fluctuations, they wouldn't contribute to 200% of a difference. Still puzzled, I decided to chart a graph by combining U.S. and China GDPs. And this chart is enlightening. The solid blue line is the official U.S. GDP. Solid red line is the official Chinese GDP. Dotted blue line is the calculated U.S. GDP. And dotted red line is the calculated Chinese GDP. Now, if you look carefully, in 2016, the solid red line would cross or had crossed the dotted blue line. What does that mean? Well, it means that if we go by the calculated GDP for the U.S., then China would have surpassed the United States in 2016 in terms of GDP. If the U.S. GDP were the same as that of Japan, Germany, UK, France, where the GDP growth matches with the official stated number, the United States would be the second largest economy now. Of course, we know China has been inflating its number. So if you look at the dotted red line, then the gap between the two dotted lines are substantial. And China isn't going to catch up with the U.S. anytime soon. However, if the U.S. didn't inflate its GDP, the two countries would have swapped their position in global ranking as of 2016. I think the U.S. government has decided to inflate its GDPs as well as China does, so that China doesn't catch up. Now, the green line on the right shows that 2020 was the year when the two GDPs were the closest. And we all know 2020 was the year COVID broke out. But since 2020, U.S. GDP has been on a steep upward trend, while China is on a downward trend. So the gap has been increasing. And so it doesn't look like China is going to catch up with the U.S. anytime soon, even if we go by the solid lines. I had shown you a professor at the University of Chicago. His name is Luis Martinez. And in his study, he found that autocratic governments overstayed their annual GDP by as much as 35%. So using the World Bank's data and applying Professor Martinez's 35%, if I apply Professor Martinez's deflator, a factor of 35% to China's real annual growth, China's GDP in 2023 would be $5 trillion U.S. But if I deflate the 35% to China's official growth, meaning using the calculated GDP, China's GDP in 2023 will be $2.7 trillion. So what do I think China's real GDP is? Well, going back to my calculation, I think China's economy has been declining since COVID. And the GDP reached its peak in 2019 and has been declining since. And there's no growth since 2019. So I think China's GDP is at most around $4.7 trillion. So what does this mean to the rest of the world? Well, I listed the top six economies' GDP based on my estimates. I normalized the United States and China's GDP by using my calculated numbers and not the official numbers. I included the other countries' actual official GDP numbers. And I also calculated their per capita GDP. For China, I used my estimated 800 million population. There's no way China has 1.4 billion people. U.S., the United States, still leads the world, being the number one economy at $13 trillion, followed by China, Germany, Japan, India, the United Kingdom, and France. China's per capita is only $5,900, ranking 120 in the world out of 190 countries. The U.S. doesn't rank number seven as it claims now. Because right now, the official per capita GDP is 80,000. With my adjustment, it's $38,810 per capita, ranking number 26 after Italy. And of course, after Germany, the United Kingdom, and France. India, with its massive 1.4 billion people, ranks very low in per capita ranking. But India's growth momentum is commendable. So I'd like to wrap up my talk by saying this. China's economy is far smaller than it claims. And the United States is far less wealthy as it seems.