Chinas GDP might actually be 60% smaller then what they are reporting
As this news is only crypto-adjacent, I still think it is very interesting and worth sharing. China along with other autocratic countries looks to be inflating their GDP numbers, for the normal reasons.
The research
In a recently published research paper by Professor Luis Martinez from the University of Chicago. He has looked at satellite data from 1992 to 2008. Compared their announced GDP numbers with the growth of night lights seen from space.
The idea behind this is that numbers can be fudged, especially when it comes to autocratic states who control all the instances that repost and check the numbers. But what cant be fudged is independently verifiable data. Such as the night lights or the electricity used.
Using that data he managed to see in this period that the autocratic countries on average reported 35% higher GDP than the night lights supported.
The Youtube channel Money & Macro then took these numbers and took China into the present day. And what they find then is the size of China's economy, while still the second largest. Is vastly smaller than the official numbers. In fact, it is 60% smaller than reported.
And why does this matter? Well, for starters the financial trouble China is in at the current moment, with their building bubble on the verge of bursting. And their banks have nationwide problems. These problems just got larger. Because if China's GDP is much smaller that means its ability to handle the financial and economical blowback of these is severely weaker than anticipated.
China's economic mussels might sound scary, but when you see them in real life, not so much
Source: https://caliberstrong.com/blog/what-is-synthol/
And China is still the second-largest economy. But this also means their economic muscles they have been flexing are more and more looking like Synthol muscles than something you would get at the gym.
If you want to take a closer look at the research the link to the official paper is down below. And in Money & Macro´s video, they cover the data and why it looks like it holds up. Also, they link to their calculations of China's current GDP.
Let me know what you think of this, and what possible ways you think this can affect crypto. As always the comment section is open to you guys and gals. If you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead.
See you on the interwebs!
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Resources
Great analysis! Things arent as they seem.