Where to Find a Directive GDP

Last week China reported that it met its 5% growth rate.

But there is much more to the story.

China’s GDP

The Eurasia Group tells us that China is in a “deflationary trap.” Bad for business, their descending prices are one of the reasons that 25% of China’s listed companies are unprofitable. Responding to less trade with the U.S., they have had to compete with lower prices in new markets. Add to that a lack of domestic consumption because of ailing real estate markets and inadequate demand for a skilled workforce and you have an economy that needs a jumpstart.

But still, they have 5% growth. One reason is their directive approach.

Our Bottom Line: The Difference Between Descriptive and Directive

Comparing the U.S. and China, economists say the former’s GDP is descriptive while China’s is directive.

In the U.S., the GDP details our consumption, investment, government, and net export spending. Then, having described past performance, it lets policy makers identify underperforming components. And, after that, they use fiscal and monetary policy tools to diagnose and cure our economic maladies.

China’s incentives are quite different.

As a directive GDP, China’s policy makers choose a target. Then, tasked with a goal, local officials feel the pressure to meet it with the statistics they report. From the local level to the top, by meeting targets, China guarantees what the state can achieve. Correspondingly, they convey their economic power.

However, they leave us with questions about accuracy. In a 2025 paper, the Federal Reserve said China’s statistics are more accurate than ever before. Reflecting GDP volatility during the past seven years, they illustrate a reality that smoother annual figures between 2010 and 2019 obscured. They also point out that recent GDP totals are closer to an alternate computation that they developed.

Still,  as we have asked in the past, we can wonder if a directive system can be accurate.

My sources and more: Thanks to my GZero email for inspiring today’s post. From there, looking more closely at China, we found a Federal Reserve paper that said China’s recent GDP numbers are accurate. Still researchers have even suggested using satellite data to estimate China’s economic growth.