Using Night-Time Light Data, Researcher Finds Chinese GDP May Be Overstated by About 35 Percent

Shanghai at night taken by the Expedition 30 crew from the International Space Station, on March 27, 2012. NASA

The Chinese Communist Party (CCP) has been known to alter its economic data. A study published in October used night-time light to determine that China, as well as other autocracies, overstate their gross domestic product (GDP) growth rates.

The U.S. study gathered night-time light (NTL) data from satellites and used that to measure the exaggeration of official GDP data of autocratic regimes.

It found that autocracies overstate their GDP by about 35 percent.

The study, published in October in the Journal of Political Economy, is authored by Luis R. Martínez, an assistant professor at Harris School of Public Policy and the College, University of Chicago.

According to Martinez, governments of all types tend to have the “incentive to overstate” their economic figures, as they are “a major determinant of government turnover,” but he found “proportional exaggeration of GDP growth in autocracies.”

Martinez examined GDP data for 184 countries sourced from the World Bank over a period of more than twenty years, and he compared these data with NTL data from the U.S. Air Force’s Defense Meteorological Satellite Program.

In democratic countries, there tend to be “checks and balances that restrain” governments from overstating their economic turnover, which are “largely absent” in dictatorships, Martinez said in a virtual interview with the VOA on Tuesday.

For the authoritarian states, “if the true growth rate is one percent, the authoritarian regime would report a growth rate of 1.3 percent,” Martinez told the VOA.

A top Chinese official recently acknowledged that the CCP’s GDP data is unreliable, Martinez wrote in his study.

“Martinez’s model suggests Beijing may have overstated GDP growth by a third over the past two decades, making its economy far smaller than claimed,” VOA reported.

On Oct. 24, China disclosed a GDP growth rate of 3.9 percent for the third quarter this year over the same period last year, after an unusual delay of nearly one week, exceeding the 3.4 percent market forecast and doing better than the 0.4 percent growth rate of the second quarter of 2022.

NTL Reveals Economic Activity

Su Tzu-yun, a senior analyst at the Taiwan-based Institute for National Defense and Security Research, said in an interview with the Chinese language edition of The Epoch Times on Nov. 1 that NTL data are a very straightforward measurement of economic activity, as the more intense and brighter the lights, the more activity.

A medical worker takes samples during a mass COVID-19 test in a residential block in Wuhan, Hubei Province, China, on Aug. 6, 2021. Getty Images

Su noted that night-time light can also reveal a public health crisis. He gave the example of the pandemic outbreak in Wuhan City of China’s central Hubei Province.

Su said that at the initial outbreak of the pandemic in Wuhan, the CCP covered up the pandemic from the world. However, American scientists later observed from night-time satellite images enormous numbers of vehicles traveling around hospitals in Wuhan, causing traffic jams. The unusual traffic flow indicated the possibility of a large-scale outbreak of a pandemic.

Manipulating Economic Data

China’s manipulation of its economic data has been observed by economists and China experts outside China.

The CCP has been altering economic data and Chinese officials themselves don’t trust their own economic data, Wang He, China observer and current affairs commentator, told the Chinese language edition of The Epoch Times on Nov. 1.

“In China, officials get promoted for their economic achievements. Therefore, they have the incentive to boost their economic data for their promotions,” he said.

“In the past, Chinese local governments published their own GDP figures, which added up to be much greater than the state-released GDP figures,” he said, adding that the CCP had to prohibit local governments from publishing locally-collected data and the national statistical body was appointed to release official data instead.

However, national statistics are overstated as well, Wang said. He doubted the 3.9 percent GDP growth rate for the third quarter of the year.

“According to Chinese financial publication Caixin’s data, China’s PMI reading from January to September was below 50, showing a contraction of production,“ he said. ”How could the 3.9 percent growth be possible?”

PMI stands for “Purchasing Managers’ Index,” revealing whether market conditions are expanding, staying the same, or contracting. A PMI reading above 50 represents an expansion, while a PMI reading below 50 indicates a contraction. A PMI reading of 50 means no change.

In 2019, The Economist reported that from 2008 to 2016 China “overstated real GDP growth by two percentage points on average every year,” citing a study by Chang-Tai Hsieh of the University of Chicago and three co-authors from the Chinese University of Hong Kong. Therefore, with the incremental addition each year over that period of time, the official GDP data for 2016 would have been exaggerated by 16 percent, or more than $1.5 trillion.

Xia Song and Yi Ru contributed to this report.