Xi Jinping muzzles Chinese economist who dared to doubt GDP numbers

Xi Jinping muzzles Chinese economist who dared to doubt GDP numbers

Chinese President Xi Jinping is trying to quell worries that China is plunging into a prolonged downturn. . (File Photo: AP)

Summary Gao Shanwen questioned Beijing’s ability to boost its economy as threats loom from a property meltdown and burgeoning debt. Gift this article

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At a Washington forum last month, a prominent Chinese economist raised doubts about Beijing’s economic management and said China’s economy might have grown at less than half the roughly 5% pace flaunted by authorities.

When Xi Jinping found out, he was furious.

According to people familiar with the matter, the Chinese leader ordered an investigation of Gao Shanwen, chief economist at state-owned SDIC Securities, who has frequently advised the government on economic and financial policies. Xi then ordered authorities to discipline him.

Two comments that Gao made at the forum, hosted jointly by the Peterson Institute for International Economics and a Chinese think tank, angered Xi, the people said.

One questioned the reliability of Chinese growth data. “We do not know the true number of China’s real growth figure," Gao said at the Dec. 12 event, whose webcast is available on the Peterson Institute’s website and on YouTube. “My own speculation is that in the past two to three years, the real [gross domestic product growth] number on average might be around 2% even though the official number is close to 5%."

Xi was further incensed to learn that Gao cast doubt regarding Beijing’s ability to take the steps needed to bolster growth.

“Their efforts to stimulate the economy will be very opportunistic," Gao said at the forum. “In the end, I don’t think they can very confidently deliver what they have promised."

Xi’s order led to a ban on Gao speaking publicly for an unspecified period, said the people familiar with the matter. For now, he has been allowed to keep his job, they said.

The leader’s reaction to Gao’s criticism highlights the deep sensitivities in Beijing over economic troubles that have mounted on Xi’s watch.

Beijing is trying to quell worries that China is plunging into a prolonged downturn. The country’s economy is being dragged down by a property meltdown that has wiped out $18 trillion in household wealth, a buildup of debt that is approaching 300% of GDP, and severe industrial overcapacity that risks a deflationary spiral.

The gathering gloom also hampers Beijing’s efforts to project strength and prepare to confront head-on tariffs and other threats from the incoming Trump administration.

In recent months, authorities have sought to stamp out any negative talk about the state of the economy.

Last year, Zhu Hengpeng, a senior economist at one of China’s top think tanks was placed under investigation, detained and removed from his post after he allegedly made remarks in a private chat group that were critical of Xi’s management of the economy, The Wall Street Journal reported in September. The remarks included veiled references to the leader’s mortality, according to the Journal report.

Other targets have ranged from business tycoons and bankers to academics, many of whom either questioned the leadership or otherwise are seen as not falling in line with what the top echelon of power wants.

The campaign has accelerated after Gao’s muzzling.

The Securities Association of China, the industry watchdog supervised by the country’s top securities regulator, late last month warned brokerages and fund managers to ensure that their economists and analysts “play a positive role" in interpreting government policies and boosting investor confidence. Offenders, according to the association, can be fired.

At a meeting this weekend, Cai Qi, Xi’s chief of staff, urged propaganda chiefs across the country to “strengthen economic publicity and expectation management"—a call to snuff out negative commentary about the economy.

The China Securities Regulatory Commission said the securities association’s directive mainly targets “chief economists who make unprofessional and irresponsible remarks." It responded to other questions, including on Gao and Xi’s involvement, by saying, “The rest is untrue," without elaborating.

SDIC Securities didn’t respond to questions.

An early indication that Gao was in trouble came last month, when an event to be hosted by China’s Nankai University—where he was due to be the guest speaker—was canceled. According to a website advertising the program, and to a message sent to attendees and seen by the Journal, the Jan. 11 event was canceled because of “the personal schedule of the guest of honor, Mr. Gao Shanwen."

In a New Year’s speech on Dec. 31, Xi tried to bolster confidence in the Chinese economy, saying it is “on an upward trajectory." He appeared to acknowledge concerns over a trade war with the incoming Trump administration, but vowed that China would prevail over challenges from the “external environment."

That did little to instill confidence in investors that Beijing has the resolve to address the country’s economic woes. Chinese stocks and bonds started the year with a selloff. The benchmark CSI 300 equity index dropped 2.9% on Jan. 2, its steepest decline on the year’s first day of trading in nearly a decade. China’s 10-year sovereign yield continued last year’s plunge to hit new lows.

Pro-growth measures launched since September, such as interest-rate cuts and debt swaps for municipalities, have had limited impact on reviving activities. The leadership then pledged bolder action at a December meeting, but many economists and analysts question whether those promises, such as one aimed at boosting consumption, will go far enough.

Gao’s remarks made in Washington were shared privately by many economists and analysts inside and outside China.

The punishment of Gao and other outspoken economists are a blow for investors trying to assess the true state of China’s increasingly opaque market.

Beijing’s official GDP figures have long been viewed with skepticism even within China’s own policymaking circles. Li Keqiang, China’s late premier, preferred to use indicators showing electricity consumption, volumes of goods shipped and bank-loan disbursements to gauge the health of the economy, rather than relying on the GDP numbers.

Doubts over the reliability of Chinese statistics have grown in recent years as authorities have restricted access to certain data and stopped releasing others, such as on foreign investors’ interest in Chinese stocks. The government also paused disclosing widely watched youth jobless data in late 2023. It later restarted publication but excluded university students from its methodology.

Economists at Barclays wrote to clients in October that they noticed discrepancies between a sudden improvement in China’s third-quarter headline economic-activity data and the country’s weakening economic indicators, such as wage growth, exports and a purchasing-managers index. Economists at Nomura also noted the inconsistencies, saying that data from alternative sources for the country’s property and financial sectors appeared at odds with official data points.

Official data shows China’s economy grew 5.2% in 2023 and was on track for an expansion of about 5% last year. Growth of roughly 5% is critical to Xi’s ambitious plans, laid out in 2020, to expand China’s wealth and double the size of the nation’s economy by 2035. Such a target would require the economy to grow an average of nearly 5% annually over 15 years, according to estimates by officials involved in policymaking.

Gao said at the forum: “If my speculation is correct, I think it might be more reasonable to expect a growth rate between 3% and 4% in the years to come, the next three to five years." He added, “But we know the official number will always be around 5%."

In a statement, the Peterson Institute said it values candid exchanges with Chinese experts and believes “fact-based analytical expert discussions of public policy are essential to fostering mutual understanding and better public policy." It said it would continue to collaborate with Chinese scholars “insofar as they are able to engage on that basis."

Rebecca Feng contributed to this article.

Write to Lingling Wei at Lingling.Wei@wsj.com