The truth about inflation rates in China

Erasmus School of Economics

The Chinese economy’s development has been well documented in recent decades. But that hasn’t always been the case.

Statistical data for the Chinese economy were rarely available in the 1960s and 70s. This changed in 1980, when suddenly many statistical data were released which also covered the previous two decades.

Data discrepancies

A recent study by Philip Hans Franses, professor of applied econometrics at Erasmus School of Economics, shows that these data weren’t so reliable in hindsight. In the study, professor Franses combines three sets of alternative quotes for the period 1953-1979. If you look at Consumer Price Index (CPI) based inflation, the differences between the ‘old’ official inflation rates and the currently available inflation rates is substantial. For 1981, the official original quote was 9.1, while today we should rely on the quote 2.5. For 1982, the ‘old’ official quote was -4.6, while we now must believe it’s 2.0.

The study shows that the newly constructed CPI-based inflation series has much more face value, considering historical events such as the Great Leap Forward. Read the full study here in the China Economic Journal.