The Chinese National Bureau of Statistics released on Monday, October 19, that the GDP grew by 4.5% in the third quarter of 2026, with a 4.6% year-on-year growth for the first three quarters of the year. However, doubts have been cast on the accuracy of these figures by the American Enterprise Institute (AEI), which questioned the discrepancy between the official data released by the Chinese government and the actual economic reality.
According to an article published by AEI on October 19 by Derek Scissors titled “Several Abnormalities in China’s Latest GDP Data,” concerns were raised regarding the official economic statistics provided by the Chinese government.
The article pointed out that traditionally, narrow money supply M1 has been used to gauge GDP, as M1 serves as a reliable indicator of the money supply used for transactions, which is closely related to GDP composition. Over the years, there has been a discrepancy between China’s M1 growth and the officially announced GDP data, leading the Chinese government to modify the definition of M1.
While in the first quarter, M1 increased by 5.1% and GDP by 5.0%, indicating a successful modification, the recent decrease in M1 growth to 3.2% alongside a GDP growth of 4.6% raises concerns, especially for the economic performance in the second and third quarters.
Further dissection of the GDP into different components revealed more troubling results, raising questions about the quality of Chinese statistical data or the actual state of the Chinese economy itself. The nominal GDP for the first three quarters of this year showed an increase of 5.6 trillion Chinese yuan compared to the same period last year.
One persistent issue is the discrepancy in reported fixed asset investment. While the government claims a 7.2% decrease, comparing this year’s data directly with the previous year reveals an actual decline of 10%.
The Chinese government has been revising down the previously published total fixed asset investment. Over the years, the investment boom claimed by the officials has been significantly reduced, and this downward adjustment is ongoing.
Despite potential downward revisions in last year’s data, a decrease of 3.7 trillion Chinese yuan in fixed asset investment in the first three quarters of this year remains significant. On the other hand, retail sales increased by 415 billion Chinese yuan during the same period, showing some positive growth. However, the overall economic scale still reflects at least a 2.5 trillion Chinese yuan decrease in the two largest domestic components of GDP.
The missing crucial data remains the service retail sales. While the Chinese government claims a robust growth in service retail sales, the specific figures have not been disclosed. Even if there has been some growth, it is unlikely to bridge the substantial gap necessary to match the levels indicated in the official GDP data for domestic components.
The last significant component to consider for the domestic GDP is government net spending. In the first three quarters of this year, the government’s fiscal deficit was approximately 2.8 trillion Chinese yuan, which is expected to be smaller than the same period last year – a positive sign from a fiscal discipline perspective but not necessarily for GDP growth.
Based on official figures, China’s merchandise trade surplus reached 6.46 trillion Chinese yuan in the first three quarters of this year, which gives credible reason to believe an increase in total trade volume during this period.
However, one disappointing fact remains evident: China’s economy is once again relying on foreign markets to drive growth. The data suggest that the domestic economy in China is either contracting or experiencing only marginal growth, with the trade surplus nearly equaling the entire GDP increment, similar to the situation in 2024 and 2025.
It is ironic that in this critical aspect, Chinese leader Xi Jinping needs to rely on foreigners to sustain China’s economic operations.
The question that remains is whether the officially announced 4.6% year-on-year growth rate is reliable. While the trade surplus may have filled the domestic economic gap, the minimal year-on-year growth rate of the surplus and limited growth in retail sales, coupled with poor government net spending and worsening fixed asset investment, indicate deeper concerns.
Despite being a simplified cross-examination, the author contends that the official 4.6% growth rate is also unconvincing unless there were underlying issues with the data released last year.