Fact-checked by Grok 2 weeks ago

Li Keqiang index

The Li Keqiang Index is an alternative economic indicator designed to gauge China's underlying economic activity by aggregating the year-over-year growth rates of three key metrics: electricity consumption (weighted at 40%), rail freight volumes (20%), and bank lending or outstanding loans (40%).^[1]^[2] Named after Li Keqiang, who served as Premier of the People's Republic of China from 2013 until his death in 2023, the index stems from his 2007 assessment as Communist Party secretary of Liaoning Province that official gross domestic product (GDP) statistics are "man-made" and unreliable, recommending instead a focus on electricity usage, rail cargo shipments, and loan disbursements as more verifiable proxies for industrial and real economic output.^[3]^[4] Formalized by analysts in 2010, it has been employed by economists and investors to cross-verify state-reported GDP figures, often revealing greater volatility and periods of subdued growth that diverge from smoother official narratives, thereby highlighting potential data smoothing or overstatement in aggregate statistics.^[5]^[6] Devised amid longstanding skepticism toward China's national accounts—exacerbated by local officials' incentives to inflate figures for political advancement—the index prioritizes hard-to-falsify inputs tied to physical production and credit expansion, reflecting a first-principles approach to economic measurement that favors observable causal drivers over top-down aggregates.^[4] Empirical analyses have found it correlates more closely with commodity prices and industrial signals than official GDP in certain periods, though its efficacy has waned as China's economy shifts toward services and high-tech sectors less captured by energy-intensive or freight-heavy metrics.^[7] Proposed refinements, such as elevating loans to 60% weighting and reducing rail freight to 10%, aim to better align it with evolving patterns, underscoring ongoing debates over proxy reliability amid opaque data environments.^[8] Despite limitations, the index remains a benchmark for independent assessments, embodying Li's emphasis on granular, incentive-resistant indicators to pierce through systemic reporting distortions.^[6]

Origins

Li Keqiang's 2007 Remarks

In 2007, while serving as the Communist Party Secretary of Liaoning Province, Li Keqiang met with United States Ambassador Clark T. Randt Jr. on March 15 and expressed deep skepticism toward China's official gross domestic product (GDP) statistics.^[3]^[9] He described GDP growth rates as "man-made" and thus unreliable for measuring true economic performance, stating they were suitable only as a loose reference rather than a precise gauge.^[3]^[10] Li emphasized that local officials had incentives to inflate figures to meet political targets, rendering national aggregates equally suspect due to aggregation from potentially manipulated provincial data.^[3] Instead of relying on GDP, Li advocated focusing on three alternative indicators he considered more concrete and harder to falsify: electricity consumption, rail cargo volume, and the amount of loans disbursed by banks.^[3]^[10] He argued these metrics provided a "fairly accurate" picture of economic activity because they were grounded in physical and financial realities less susceptible to administrative tampering.^[3] This perspective reflected broader concerns within some Chinese leadership circles about data integrity amid rapid industrialization and decentralized reporting systems.^[10] The remarks, documented in a classified U.S. embassy cable later released by WikiLeaks in 2010, highlighted Li's pragmatic approach to economic assessment during his provincial tenure, prioritizing observable inputs over headline outputs.^[3]^[9] They underscored systemic challenges in China's statistical framework, where political pressures could distort reported growth to align with central directives.^[11]

Context of Chinese Economic Data Skepticism

Skepticism regarding the accuracy of China's official gross domestic product (GDP) figures, as reported by the National Bureau of Statistics (NBS), has persisted among economists and analysts due to observed inconsistencies between reported growth and independent indicators, as well as structural incentives within the political system that encourage data manipulation.^[12]^[13] Official data often exhibit unusually low volatility, with growth rates frequently aligning closely with government targets, raising questions about smoothing or fabrication to meet policy goals.^[5] A primary driver of this skepticism stems from the cadre evaluation system, where local government officials' promotions are tied to achieving high GDP growth targets, incentivizing overreporting at provincial and municipal levels.^[14] The aggregate of provincial GDP estimates has historically exceeded the national figure by margins as large as 5-10% in some years, suggesting systematic inflation before central adjustments.^[14]^[15] These incentives persist despite central government efforts to curb falsification, as lower-level officials prioritize short-term performance metrics over long-term accuracy.^[5] Empirical discrepancies further underscore reliability concerns, particularly when official GDP is compared to "hard" physical indicators less susceptible to manipulation, such as electricity consumption. For instance, between 1997 and 2000, amid the Asian Financial Crisis, NBS data showed real GDP growth of 24.7%, yet electricity use declined by 12.8%, an inverse relationship incompatible with typical economic activity patterns.^[12] Similar divergences have appeared during other periods of reported robust growth, prompting analysts to favor alternative metrics like energy proxies for cross-verification.^[16] This context of doubt has led international institutions and independent researchers to develop unofficial gauges of Chinese economic performance, emphasizing verifiable data over potentially politicized aggregates, though even these alternatives face challenges from incomplete access to underlying information.^[12]^[15]

Components and Methodology

Core Indicators

The Li Keqiang Index comprises three primary indicators: electricity consumption, railway cargo volume, and loans disbursed by banks. These metrics were selected for their perceived resistance to manipulation compared to official gross domestic product (GDP) figures, as they derive from physical and financial activities that are more difficult to fabricate en masse. Electricity consumption serves as a proxy for industrial output and overall energy demand, capturing real economic activity in manufacturing and heavy industry sectors that dominate China's economy.^[17]^[5] Railway cargo volume measures the tonnage of freight transported via China's rail network, reflecting the physical logistics of goods movement essential for domestic trade and supply chains. This indicator emphasizes tangible economic flows, particularly in bulk commodities like coal, steel, and construction materials, which are less amenable to statistical inflation. Bank loans, specifically the growth in outstanding loans from financial institutions, gauge credit expansion and investment appetite, signaling resource allocation toward productive enterprises rather than speculative or state-directed projects.^[1]^[8] In practice, these indicators are often weighted in the index—typically with electricity consumption at 40%, railway freight at 25-40%, and bank loans at 20-35%, though exact proportions vary by formulation—to derive a composite growth rate. Proponents argue that their combination provides a bottom-up view of economic momentum, grounded in verifiable operational data from utilities, transport authorities, and banking regulators. For instance, electricity usage data is sourced from state grid reports, rail volumes from the China Railway Corporation, and loan figures from the People's Bank of China, offering cross-verifiable hard metrics amid skepticism toward aggregated GDP statistics.^[5]^[6]

Weighting and Calculation

The Li Keqiang index is typically calculated as the arithmetic mean of the year-over-year percentage growth rates of its three core components: railway freight volume, electricity consumption (primarily industrial), and the stock of loans extended by large and medium-sized banks.^[18]^[19] This equal-weighting approach assigns one-third of the index value to each indicator, reflecting the informal origins of the metric as a simple proxy rather than a statistically optimized composite.^[6] The growth rates are derived from monthly or quarterly data, often smoothed over a 12-month moving average to reduce volatility before averaging.^[5] While equal weighting is the conventional method employed by outlets such as The Economist and Bloomberg in their presentations of the index, econometric analyses have proposed alternative weightings to maximize correlation with verifiable economic activity. For instance, a 2017 study by the Federal Reserve Bank of New York recommended assigning approximately 50% weight to electricity consumption, 40% to loans, and 10% to railway freight, based on regression coefficients that better align the index with independent measures like provincial GDP aggregates.^[18] Similarly, research published in the China Economic Review suggested 60% weight to loan growth and only 10% to railway freight, arguing that the latter has diminished relevance amid shifts to road and sea transport.^[8] These adjustments stem from principal component analysis and historical back-testing, highlighting that equal weights may overemphasize outdated indicators like rail cargo, which accounted for a declining share of freight post-2010.^[20] In practice, the index's calculation remains ad hoc and varies slightly across implementations, with no standardized formula endorsed by Chinese authorities. Data inputs are drawn from official releases, such as those from the National Bureau of Statistics for freight and electricity, and the People's Bank of China for loans, though adjustments for seasonality or base effects are sometimes applied informally by analysts.^[19] The resulting index value, expressed as a percentage growth rate, serves as a benchmark for quarterly or annual economic momentum, but its simplicity limits adjustments for structural changes like energy efficiency improvements, which can distort electricity's signal without recalibration.^[21]

Data Sources and Adjustments

The data for the Li Keqiang index's components are primarily derived from official monthly releases by Chinese government bodies, which provide the raw figures used to compute growth rates. Electricity consumption, emphasizing industrial usage as a gauge of manufacturing output, is reported by the National Bureau of Statistics (NBS) through its energy statistics, capturing total or sector-specific generation and demand.^[5]^[12] Railway freight volume, serving as a proxy for heavy industry and bulk commodity transport, originates from NBS transport data compilations, which aggregate tonnage handled by the national rail network under the China State Railway Group Co., Ltd.^[22]^[23] Bank loans, typically measured as year-over-year changes in new RMB loans or outstanding credit, are sourced from the People's Bank of China (PBOC), reflecting monetary policy impacts on lending to enterprises and households.^[1]^[24] Calculation of the index involves deriving year-over-year percentage changes for each indicator from these sources and combining them via a weighted average, with the standard formulation—established by The Economist in 2010—assigning 40% weight to electricity consumption growth, 40% to bank loan growth, and 20% to rail freight growth to approximate real economic activity.^[1] Some variants employ equal weighting or arithmetic means for simplicity, particularly in early applications tracking pre-2010 correlations with GDP.^[25] Adjustments to raw data or methodology address limitations in official reporting, such as potential smoothing or inconsistencies noted in NBS and PBOC series. Empirical refinements include reweighting based on regression analyses against provincial GDP or export data; a 2018 study, for instance, advocates elevating loan growth to 60% weight and reducing rail freight to 10% to improve alignment with nominal GDP fluctuations, citing loans' stronger signaling of investment-driven expansion.^[8] Refinements may also specify mid- and long-term loans over aggregate figures to prioritize infrastructure and production financing, excluding consumer or short-term credit distortions.^[5] Seasonal patterns in Chinese data, unadjusted in primary releases, prompt secondary modifications by analysts using methods like X-12-ARIMA or SEATS to filter calendar effects, such as Lunar New Year disruptions affecting freight and electricity, thereby yielding smoother index trends for forecasting.^[26]^[27] These adjustments, while enhancing usability, introduce analyst discretion and underscore ongoing debates over the opacity of upstream data collection in NBS and PBOC processes.

Historical Performance

Correlation with GDP Pre-2010

Prior to 2010, the Li Keqiang index displayed a strong correlation with China's official GDP growth rates, as the economy's expansion was predominantly driven by heavy industry, manufacturing, and infrastructure investment—sectors closely tied to the index's components of electricity consumption, rail freight volume, and bank loans. During the 2000s, annual GDP growth averaged approximately 10.5%, accompanied by parallel surges in these indicators; for example, electricity production expanded at rates often exceeding 10% yearly, reflecting the energy-intensive nature of industrial output.^[28] Studies analyzing this period confirm the index's alignment, with the equal-weighted average of the components serving as a reliable proxy before structural shifts began to alter economic composition.^[6] This correlation stemmed from causal linkages inherent to China's growth model at the time: rail freight volumes, dominated by coal and raw materials transport, grew in tandem with industrial production, while bank loans fueled fixed-asset investments that comprised over 40% of GDP. Empirical assessments, such as those reweighting the index components, indicate that the original formulation captured real activity effectively up to the late 2000s, with electricity and freight showing elasticities near or above 1 relative to GDP in manufacturing-heavy provinces.^[20] However, early signs of divergence appeared during the 2008-2009 global financial crisis, when the index registered a more pronounced contraction—driven by a drop in freight traffic—compared to official GDP's reported 9.4% growth in 2009, highlighting potential official data smoothing.^[17] Overall, the pre-2010 period validated the index's utility as an alternative measure, as its indicators empirically reflected underlying economic momentum without the perceived manipulations affecting headline GDP statistics, though it was less attuned to emerging service-sector dynamics.^[19] This alignment underscores the index's origins in skepticism toward aggregated data, privileging observable, hard-to-falsify metrics during an era of verifiable industrial expansion.^[10]

Post-2010 Trends and Divergences

Following the strong correlation observed prior to 2010, the Li Keqiang index exhibited notable divergences from official GDP growth rates in subsequent years, primarily due to decelerating trends in its heavy industry-oriented components amid China's economic rebalancing toward services and lighter manufacturing. Railway freight volume growth, which peaked at around 20% in the early 2010s, slowed sharply post-2012, turning negative in several years by the mid-2010s as logistics shifted toward road and sea transport and overall industrial activity moderated.^[20] ^[17] Electricity consumption growth, another key pillar, declined from double-digit rates in 2010-2011 to stabilizing around 5-10% annually by the late 2010s, reflecting efficiency gains and reduced energy intensity in production.^[20] Bank loan growth remained relatively stable at 12-13% year-over-year through much of the decade but failed to offset the weakness in the other indicators, contributing to an overall index trajectory that implied more subdued activity than official GDP figures, which maintained smoother 6-7% annual growth.^[19] These divergences were particularly pronounced during the 2014-2016 slowdown, when the index registered sharper contractions—driven by freight and electricity drops—compared to official GDP, which reported only modest deceleration from 7.3% in 2014 to 6.7% in 2016.^[17] In contrast, periods like 2010-2012 saw the index outpacing GDP, with growth rates exceeding 20% in some quarters, highlighting its sensitivity to credit-fueled investment booms.^[20] Analyses adjusting weights to emphasize loans (optimal at 6-8 times freight's influence) suggest the standard index may understate growth post-2012, aligning more closely with or even exceeding official GDP in years like 2015, where a reweighted version implied 8.2% versus reported 6.9%.^[19] Nonetheless, the unadjusted index's greater volatility—peaking and troughing more extremely than GDP's steady path—underscored persistent skepticism about the latter's reliability, though reweighting indicates official figures were not systematically overstated.^[5] By the late 2010s, the index's signal weakened further relative to GDP, with composite growth averaging below official rates in several years, as structural shifts diminished the relevance of freight and electricity metrics. For instance, while GDP grew 6.1% in 2019, the index reflected ongoing industrial softening amid rising service sector contributions not captured by its components.^[5] This pattern of divergence persisted into the early 2020s, though pandemic disruptions amplified discrepancies, with the index showing no extreme deviation from nominal GDP but highlighting underlying volatility in real activity.^[5]

Criticisms and Limitations

Failure to Capture Service Sector Growth

The Li Keqiang Index relies on proxies—railway freight volume, electricity consumption, and bank lending growth—that are predominantly tied to manufacturing, infrastructure, and heavy industry, rendering it ill-suited to measure service sector activity.^[29] These indicators overlook services like finance, information technology, retail, and professional services, which contribute minimally to freight transport or industrial power usage.^[18] China's service sector expanded significantly during the 2010s, rising from 44% of GDP in 2010 to approximately 54% by 2023, driven by policies promoting consumption and urbanization.^[30] This structural shift amplified the index's shortcomings, as service-led growth decoupled from traditional industrial metrics; for example, e-commerce and digital services surged without commensurate rises in rail cargo.^[31]^[18] Analyses indicate the index's rail freight component, in particular, lost relevance amid this rebalancing, with its growth rate declining steadily after 2015 while services outperformed manufacturing.^[18] Consequently, the index has increasingly understated aggregate economic performance, prompting calls for reweighting or supplementary measures to incorporate service dynamics.^[5]

Impacts of Technological Efficiency Gains

Technological efficiency gains pose a significant limitation to the Li Keqiang index by decoupling its core input-based indicators—particularly electricity consumption and railway freight volume—from actual economic output. These proxies, which emphasize physical resource usage, fail to account for productivity improvements that enable more value creation per unit of energy or transport, leading the index to systematically understate growth during periods of rapid technological advancement. For instance, advancements in industrial processes, such as high-efficiency motors and automation, reduce electricity intensity (consumption per unit of GDP), while optimized logistics and lighter materials diminish freight requirements for equivalent output.^[32]^[8] In China, electricity consumption has increasingly decoupled from GDP growth due to deliberate efficiency policies and innovations, including the adoption of LED lighting, variable-speed drives in manufacturing, and energy-saving standards enforced since the 1980s. Energy intensity declined by approximately 3.7% annually from 1990 to 2010, driven by structural reforms and technological upgrades that separated energy use from economic expansion, with further reductions averaging 2-3% per year post-2010 amid the "Made in China 2025" initiative promoting smart manufacturing. This decoupling was evident in 2015, when electricity consumption grew by 5.3% while official GDP expanded 6.9%, attributing part of the gap to efficiency gains rather than solely weaker activity.^[33]^[34]^[35] Railway freight volume faces analogous challenges from logistical efficiencies, including containerization, just-in-time inventory systems, and shifts to higher-value, lower-bulk goods enabled by digital supply chains, which reduce transported tonnage per yuan of GDP. Studies indicate that such productivity enhancements, accelerated by e-commerce and AI-optimized routing since the mid-2010s, have contributed to freight indicators lagging economic performance, exacerbating the index's bias toward heavy industry over innovation-driven sectors. Bank lending, the third component, is less directly affected but still overlooks equity financing and venture capital fueling tech startups, further compounding underestimation in efficiency-led growth phases. Overall, these dynamics render the index increasingly obsolete as China's economy matures beyond resource-intensive expansion, highlighting its inadequacy for capturing total factor productivity gains estimated at 1-2% annually in recent decades.^[5]^[8]

Persistent Data Manipulation Concerns

While the Li Keqiang index relies on indicators such as electricity consumption, railway freight volume, and bank lending—selected for their perceived resistance to fabrication compared to GDP data—analysts have raised ongoing concerns that these metrics remain vulnerable to manipulation within China's centralized statistical system. Local officials, whose promotions often hinge on reported economic performance, face incentives to inflate figures at provincial levels before national aggregation, potentially affecting even physical measures like freight and energy use.^[5]^[36] Electricity consumption data, a core component, has drawn particular scrutiny for reliability issues persisting since the mid-1990s, including inconsistencies between provincial aggregates and national totals, as well as a noted decline in overall energy statistics quality despite robust economic expansion. Studies highlight internal discrepancies and reporting errors in energy metrics from 1990 to 2000, suggesting underreporting or methodological flaws that undermine trust in official figures.^[37]^[37] Railway freight volume, while tied to tangible operations under the state-owned China Railway Corporation, is not immune; experts note that inefficient transport practices—such as favoring rail over more efficient modes to boost reported ton-kilometers—can artificially elevate data to align with growth targets. Broader analyses of Chinese output indicators, including freight, reveal patterns consistent with local-level political pressures, where sub-national data manipulation propagates upward.^[5]^[38] Bank lending volumes face similar doubts, as financial institutions operate under quotas and directives that encourage overreporting of loans to demonstrate policy compliance, compounded by opaque shadow banking activities that distort official aggregates. In 2023, China's National People's Congress Standing Committee issued a rare public warning about inflated and inaccurate data in banks' asset quality reporting, signaling systemic issues in financial metrics.^[39]^[40] These concerns have led some observers to caution against overreliance on the index, with one expert stating, "all proxies based on government data are unreliable," advocating for independent datasets to cross-verify trends. Despite such critiques from think tanks and academics, the index persists as a benchmark because outright fabrication of physical or transactional data is logistically harder than GDP adjustments, though persistent incentives erode full confidence.^[5]^[5]

Applications and Reception

Adoption by Financial Markets

Financial markets, particularly commodity traders and currency investors, have increasingly adopted the Li Keqiang index as a more reliable proxy for China's economic momentum compared to official GDP data, due to its basis in verifiable physical and financial indicators less susceptible to manipulation.^[1] ^[41] Analysis from 2005 to 2018 demonstrates that the index exhibits stronger lagged correlations with key market variables; for instance, copper prices correlate at 0.55 with the index (four-quarter lag) versus 0.25 with GDP (one- to three-quarter lags), while similar patterns hold for platinum and crude oil prices.^[1] Hedge funds and commodity desks rely on the index to anticipate demand-driven price movements, as evidenced by its superior predictive power for commodity currencies like the Canadian dollar, Australian dollar, and Brazilian real during the same period, outperforming GDP in most cases except the Russian ruble.^[1] ^[42] Asset managers such as WisdomTree incorporate it into geopolitical commodity strategies, weighting bank loans at 40%, electricity production at 40%, and rail freight at 20% to assess growth amid data opacity.^[43] In equity contexts, firms like T. Rowe Price reference it against indices such as MSCI China to evaluate divergences from official narratives.^[44] By March 2018, the index's signals of slower growth had prompted warnings of headwinds for global commodities, influencing trading positions more directly than GDP releases.^[41] Citigroup economists, employing a variant, highlighted in September 2014 that it implied growth below the official 7.5%, guiding client assessments of investment risks.^[45] This adoption persists among macro-focused investors, who view it as a causal anchor for real activity despite post-2010 structural shifts in China's economy.^[7]

Influence on Policy and Academic Analysis

The Li Keqiang Index has profoundly shaped academic scrutiny of China's official economic statistics, prompting researchers to develop alternative gauges of growth amid persistent doubts about GDP data integrity. Econometric studies, such as those examining correlations between the index's components—railway freight volume, electricity consumption, and loan issuance—and provincial tax revenues, have argued that reported national GDP may understate true expansion when reweighted appropriately, with loans assigned 60% weight and freight only 10%. Other analyses, however, reveal that the index's tight alignment with GDP holds primarily within Chinese datasets and falters when applied cross-nationally, underscoring its context-specific utility rather than universal applicability.^[8]^[6] In scholarly literature, the index has catalyzed explorations of data manipulation incentives, with models demonstrating how local officials' career pressures incentivize GDP inflation, positioning the index as a "popular alternative statistic" for validation. Federal Reserve analyses caution against overreliance on it due to its narrow focus on traditional sectors, advocating integration with satellite night-lights data for broader growth proxies that reveal greater volatility than official figures from 2012–2022. These critiques have spurred refinements, including composite indices blending the Li Keqiang metrics with service-sector indicators to address post-industrial shifts.^[46]^[21]^[5] On the policy front, the index has exerted indirect influence by fostering skepticism among international analysts and investors, who favor it over GDP for predicting commodity demand and currency movements, as its components better reflect tangible activity in export-driven economies. This has informed cautious approaches in foreign economic policymaking, such as adjusted trade projections and investment risk assessments wary of Beijing's smoothed statistics. Domestically, Li Keqiang's advocacy for such hard-data metrics during his Liaoning governorship and premiership highlighted tensions with centralized reporting, contributing to debates on statistical reforms, though Xi Jinping's consolidation of control has marginalized reformist emphases on verifiable indicators in favor of state-directed priorities.^[1]^[47]

Alternative Indices and Evolutions

As China's economy shifted toward services, which accounted for over 50% of GDP by the end of 2015, the original Li Keqiang index faced criticism for its heavy-industry focus, prompting proposals for reweighted or expanded versions.^[48] Analysts suggested adjusting weights to emphasize bank loan growth at 60%, electricity consumption at 30%, and railway freight at 10%, arguing this better captured credit-driven activity while downplaying declining freight relevance.^[49] Such evolutions aimed to maintain the index's utility amid structural changes, though no official adoption occurred. Further developments proposed broader "new Li Keqiang indices" incorporating service-sector indicators to reflect consumption's role in driving about 60% of growth by 2016.^[48] These included monthly unemployment surveys from 120,000 households (starting July 2015), urban and rural wage growth, progress on structural reforms (tracked via indices like Caixin's, showing 23 fast, 74 slow, and 16 stalled areas as of 2016), and retail sales augmented by e-commerce data from platforms like Alibaba and JD.com.^[48] The rationale centered on aligning with policy priorities such as employment stability, income rises, and environmental goals, addressing the original's neglect of non-industrial activity.^[48] Beyond evolutions of the core index, alternatives emerged using less manipulable data sources. Satellite-based night-time lights intensity has served as a proxy, correlating with economic output and revealing volatility obscured in official figures, such as sharper declines during the 2020 Wuhan lockdown.^[5] Federal Reserve analyses caution against overreliance on narrow indicators like the Li Keqiang trio, favoring models integrating lights data with sparse principal least squares methods for broader activity estimates.^[21] Other proxies include aggregates of provincial GDP data, which often exceed national figures due to local overreporting incentives, and high-frequency metrics like fiscal revenues, wholesale/retail sales, international trade volumes, and auto sales.^[50]^[5] These alternatives, while imperfect—e.g., lights data may miss indoor efficiency gains—provide cross-verification against potential national data smoothing, with experts like those at CSIS advocating combinations for robustness.^[5] No single successor has supplanted the original framework, but hybrid approaches persist in academic and market analyses.^[49]

Recent Developments

Post-Pandemic Divergences (2020–2023)

During the initial pandemic year of 2020, the Li Keqiang index components reflected sharp but temporary contractions aligned with official GDP growth of 2.2%, though with greater monthly volatility capturing factory shutdowns and logistics halts not fully evident in quarterly aggregates. Electricity consumption grew 3.1% annually despite Q1 drops exceeding 10% in key provinces, rail freight volume declined modestly amid export surges via other modes, and bank lending expanded 13.3% via stimulus measures. This period demonstrated the index's sensitivity to real-time industrial disruptions under early lockdowns, contrasting the smoothed official narrative.^[5] In 2022, amid prolonged zero-COVID restrictions including the Shanghai lockdown, index components exhibited pronounced divergences from the reported 3.0% GDP growth, underscoring policy-induced volatility. Electricity demand rose only 4.4% yearly, with industrial usage plunging over 13% in April due to halted production; rail freight turnover increased around 4% but volume growth stagnated near 0% in affected quarters, reflecting supply chain breakdowns; bank loans grew 11.0%, propped by fiscal injections. These hard metrics highlighted deeper contractions—estimated at -2% to -5% in underlying activity by some analysts—than official figures, which critics attribute to top-down adjustments prioritizing stability targets over granular reporting.^[5]^[51]^[52] Following the abrupt policy pivot in December 2022, the index signaled a muted post-reopening recovery through 2023, averaging below pre-pandemic norms amid structural headwinds like the property slump and deflationary pressures. Official GDP expanded 5.2%, yet rail freight volume grew just 1.0%, indicating subdued heavy goods movement despite infrastructure pushes; electricity consumption accelerated to 6.7%, driven partly by manufacturing rebound and emerging data center loads; loan growth eased to 9.7%. Overall, the index's 5.9% average pace from 2022-2023 trailed the 6.6% of 2016-2019, aligning more closely with independent assessments of 1.5% true growth than Beijing's claims, as physical proxies resist service-sector inflation or statistical padding.^[53]^[52]^[54]^[55]

Trends in 2024–2025 and Future Relevance

In 2024, the Li Keqiang index registered growth of approximately 5.9% on average over the 2022–2024 period, modestly outpacing China's official 5% GDP expansion but below the 6.6% pre-pandemic benchmark from 2016–2019, underscoring persistent structural slowdowns in core activity indicators.^[53] Electricity consumption, weighted at 40%, advanced nearly 8% year-on-year, driven by electrification trends and industrial recovery despite broader energy demand growth dipping below 3%.^[56]^[57] Rail freight volumes, at 20% weighting, marked the eighth consecutive annual increase to 3.99 billion metric tons, reflecting steady logistics demand amid policy-supported infrastructure.^[58] Bank lending growth, also 40% weighted, averaged 8.88% for major institutions, though overall yuan-denominated loans decelerated toward year-end amid subdued private sector appetite.^[59] Early 2025 data signaled potential softening, with outstanding yuan loans contracting in July for the first time in two decades and growth hitting a record low of 6.9% year-on-year, highlighting credit restraint despite stimulus efforts.^[60] Railway freight loading rose 4.2% in Q1 to 970 million tons, buoyed by cross-border expansions, while electricity demand growth persisted with clean sources exceeding overall increases in the first half.^[61]^[62] These trends suggest a transitory post-pandemic rebound fading into uneven momentum, with the index capturing industrial resilience against weakening financial flows. The Li Keqiang index retains analytical value into the future as an empirical check against official metrics, where data credibility concerns—stemming from historical inconsistencies and institutional incentives—persist among independent observers.^[63] Its focus on tangible, verifiable inputs like physical throughput and credit extension offers causal insight into real economic vitality, particularly for export-oriented and heavy industry segments that underpin China's growth model. Nonetheless, evolving priorities toward consumption, services, and efficiency gains may diminish its standalone precision, prompting integrations with supplementary indicators for holistic assessment.^[64]

References

[1]
China's Li Keqiang Index - The Hedge Fund Journal
His remarks to a U.S. diplomat a decade ago describing the official GDP as “man-made,” inspired The Economist to create an index of his three preferred measures ...Missing: origin | Show results with:origin
[2]
China - Li Keqiang Index vs. CSI 300 Index - MacroMicro
The Li Keqiang Index is first created by The Economist in 2010. The index is based on the three indicators preferred by Former Premier Li Keqiang for ...Missing: origin | Show results with:origin
[3]
China's GDP is "man-made," unreliable: top leader | Reuters
Dec 6, 2010 · China's GDP is "man-made," unreliable: top leader. By Reuters ... Li Keqiang, head of the Communist Party in northeastern Liaoning ...Missing: loans | Show results with:loans
[4]
Some Alternative Methods for Tracking Chinese GDP
Sep 12, 2017 · Owyang and Shell also looked at the popular Li index, which was named after Li Keqiang, then China's vice premier and now premier, who in 2007 ...<|separator|>
[5]
Measurement Muddle: China's GDP Growth Data and Potential ...
Sep 13, 2023 · GDP Growth and the Li Keqiang Index, 2012-2022 As Figure 5 shows, the LKQ Index reveals a great deal more volatility than China's real GDP data ...
[6]
The Li Index and Attempts to Decipher Chinese GDP Growth Rates
Oct 10, 2023 · One of the most popular of these methods is the Li Index, a method used by Chinese Premier Li Keqiang in an admitted attempt to circumvent ...Missing: origin | Show results with:origin
[7]
The Li Keqiang Index, Machine Learning, And Some Advice From ...
Mar 9, 2018 · What they found was the the Li Keqiang Index does a much better job at cueing moves in industrial metals and other commodities than the official ...Missing: definition origin
[8]
China's GDP growth may be understated - ScienceDirect.com
We find that the Li Keqiang index should be reweighted, with loan growth receiving 60% of the weight and railroad freight growth receiving only 10%. •. Our ...
[9]
Cable: 07BEIJING1760_a - WikiLeaks
FIFTH GENERATION STAR LI KEQIANG DISCUSSES DOMESTIC CHALLENGES, TRADE RELATIONS WITH AMBASSADOR ; Date: 2007 March 15, 10:24 (Thursday). Canonical ID:.
[10]
On the Reliability of Chinese Output Figures - San Francisco Fed
Mar 25, 2013 · For example, in remarks to the U.S. ambassador in 2007, Vice Premier Li Keqiang stated, “GDP figures are 'man-made' and therefore unreliable,” ...
[11]
Is China fudging its GDP figures? Evidence from trading partner data
Even prominent Chinese officials have expressed skepticism about the accuracy of Chinese data. For example, in 2007, Li Keqiang (currently China's Premier ...
[12]
China's Official Economic Data: Is It Accurate? | St. Louis Fed
Some critics of official Chinese data cite falsification at the provincial and individual levels as the biggest source of unreliable GDP statistics. Holz ...China's Economic Data: An... · From Command Economy To... · Indexed Gdp Proxies
[13]
What Is GDP in China? | Carnegie Endowment for International Peace
Jan 16, 2019 · The reason for the widespread skepticism is the disconnect between the official data and perceptions on the ground. According to the National ...China Financial Markets · What Does Gdp Measure? · Is Gdp Measured As An Output...
[14]
Official Statistics Overstate China's Growth Rate | NBER
Local governments in China have incentives to over-report economic activity and the sum of local GDP estimates often exceeds the national alue. Local officials ...<|control11|><|separator|>
[15]
The Strategic Logic of China's Economic Data - Rhodium Group
Sep 11, 2025 · Internally, China uses GDP targets to anchor expectations and incentives among lower-level officials. Because GDP targets are seldom adjusted, ...
[16]
The Fed - Is China Really Growing at 5 Percent?
Jun 6, 2025 · ... Chinese economy to once again treat the official GDP data with skepticism. In this note, we revisit an alternative indicator of Chinese GDP ...
[17]
Tracking Commodities With Li Keqiang Index - CME Group
Dec 14, 2021 · The Li Keqiang Index includes only three components: rail freight volumes, electricity production, and bank loans. The index dipped sharply in ...
[18]
Is Chinese Growth Overstated? - Liberty Street Economics
Apr 19, 2017 · ... Li Keqiang index will likely send increasingly faulty signals about the state of China's economy. In fact, our estimate for Chinese growth ...<|separator|>
[19]
On the measuring and mis-measuring of Chinese growth | CEPR
Jul 1, 2017 · ... Li Keqiang, then the Communist Party secretary of Liaoning Province ... Rabinovitch, S (2010), “China's GDP is 'man-made,' unreliable ...
[20]
[PDF] NBER WORKING PAPER SERIES CHINA'S GDP GROWTH MAY BE ...
The Economist has been reporting the Li Keqiang index to this day. However, all of the above proposals for measuring the growth rates of the Chinese economy ...
[21]
[PDF] How Stable Is China's Growth? Shedding Light on Sparse Data
Among the index-based approaches, the simplest, and possibly the best known in recent years, is the so-called “Li Keqiang index,” which is named after China's ...
[22]
Basic Conditions on Transport - National Data
Total Freight Traffic (10 000 tons), 970602, 1234938 ; Railways (10 000 tons), 150681, 165982 ; Highways (10 000 tons), 724040, 940387 ; Waterways (10 000 tons) ...
[23]
China - Railway Freight Traffic | China GDP | Collection - MacroMicro
Freight traffic by railways is one of the subindices under the Li Keqiang Index, which is composed of three indicators (railway freight, ...
[24]
Total Loans | China GDP | Collection - MacroMicro
Total loans from banks are one of constituents of the Li Keqiang Index. Created by The Economist, the Li Keqiang Index is composed of the three indicators ...Missing: volume | Show results with:volume
[25]
[PDF] Alternative Indicators for Chinese Economic Activity Using Sparse ...
native indicators is the so-called Li Keqiang index, which is essentially an arithmetic average of the growth rates of electricity production, railroad freight, ...
[26]
Seasonally Adjusting Chinese Economic Time Series | RDP 2015-13
This section discusses the properties of a selection of Chinese economic time series and shows the results of seasonal adjustment using X-12-ARIMA and SEATS ...
[27]
[PDF] Seasonal Adjustment of Chinese Economic Statistics
Nov 13, 2015 · 10 Some analysts have considered the 'Li Keqiang Index' (named after China's current premier) as an alternative gauge of economic activity.
[28]
China - Countries & Regions - IEA
Growth in electricity demand has slowed down or even reversed in many ... Evolution of electricity final consumption by sector in China since 2000.
[29]
Are Chinese GDP statistics reliable? - Bank of Finland Bulletin
Apr 13, 2016 · Revisions by the National Bureau of Statistics (NBS) ... Keqiang, composed of electricity consumption, the railway cargo volume and bank lending.
[30]
Unpacking China's GDP - ChinaPower Project - CSIS
This trend, however, is changing. In 2010, China's service sector amounted to just 44 percent of GDP, considerably lower than today.
[31]
[PDF] Contents - The Conference Board
Nov 10, 2015 · Moreover, the Li Keqiang Index fails to take the growing services sector into account while it overstates the contribution from bank lending ...
[32]
China's growth data - can you trust it? - BBC News
Jan 19, 2016 · ... 2007 described regional GDP data as "man-made" and unreliable. ... As a consequence, economists calculated a somewhat informal Li Keqiang ...
[33]
Constraining Energy Consumption of China's Largest Industrial ...
Between 1980 and 2000, China's energy efficiency policies resulted in a decoupling of the traditionally linked relationship between energy use and gross ...
[34]
The decoupling of GDP and energy growth: A CEO guide - McKinsey
Apr 24, 2019 · In China and India, lately two of the greatest engines for energy demand, the share of services in GDP will grow by almost ten percentage points ...Decoupling Energy Demand... · The Efficiency Effect · The Evolving Energy Mix<|control11|><|separator|>
[35]
China growth probably half reported rate or less, say sceptics | Reuters
Aug 6, 2015 · Li Keqiang, now Chinese Premier, was cited in leaked U.S. ... That implies a growth rate of 3.2 percent, and shows a significant decoupling ...
[36]
[PDF] The Reliability of China's Economic Data: An Analysis of National ...
Jan 28, 2013 · There is evidence of political manipulation at the local level, and to some degree, also in the central government. Unfortunately, economists ...
[37]
Accuracy and Reliability of China's Energy Statistics - ResearchGate
Aug 10, 2025 · There has been continuing concern about the accuracy and reliability of China's energy statistics for more than a decade ( Sinton, 2001 ).
[38]
[PDF] Is China Fudging its Figures? Evidence from Trading Partner Data
Sep 21, 2015 · Railway freight traffic, millions of tons. China Railway Corporation ... data manipulation, may explain observed discrepancies for China.
[39]
China's lawmakers issue rare warning over banks' asset quality due ...
Nov 23, 2023 · China's lawmakers issue rare warning over banks' asset quality due to inflated, inaccurate data. Standing Committee of the National People's ...<|control11|><|separator|>
[40]
[PDF] Vulnerabilities in China's Financial System and Risks for the United ...
The reliability of the Chinese government's official financial data, including the true extent of NPLs, shadow banking assets, government debt, and composition ...
[41]
China's Li Keqiang Index: Headwinds for Commodities? - CME Group
Mar 8, 2018 · China's shadow economic indicator, the Li Keqiang index, might be signaling slower growth and in turn headwinds for commodities and ...
[42]
Commodities Eye 2020 China Growth Prospects - CME Group
Figure 13: Li Keqiang Index and Official Chinese GDP as indicators of growth. What may be useful to commodity and currency investors, however, is that ...<|separator|>
[43]
Scarcity, Strategy and Sovereignty: The Geopolitical Rise of ...
Feb 27, 2025 · Sources: WisdomTree, Bloomberg. January 2005–December 2024. Li Keqiang index: 40% outstanding bank loans, 40% electricity production, 20% rail ...
[44]
China: Time to revisit an unloved asset class - T. Rowe Price
We have been here before. (Fig. 4) MSCI China Index vs. Li Keqiang Index (a mix of real economic activities in China). A long-term chart of the MSCI China ...
[45]
Is China really growing at 7.5%? Not according to Citigroup's 'Li ...
Sep 26, 2014 · Not according to Citigroup's 'Li Keqiang index'. By Mike Riddell 26 ... The data collected is used by us to understand website traffic ...
[46]
Chasing or cheating? Theory and evidence on China's GDP ...
The effect of innovation pilot on carbon total factor productivity: Quasi-experimental evidence from China ... efficiency, carbon emission intensity, and ...Missing: criticism | Show results with:criticism
[47]
Remembering Li Keqiang: Policy Divergence in Zhongnanhai and ...
Mar 10, 2025 · xi_li_gap is the logarithm of the difference between Xi and Li Keqiang's index as estimated by LSS. ... reuters.com/article/idUS1189875570/; “ ...
[48]
The Li Keqiang Index is dead, long live the new Li Keqiang Index
Mar 11, 2016 · Instead, he looked to figures such as electricity consumption, railway freight and bank loans as more reliable indicators. We know this ...
[49]
How to measure China's true economic growth - The Economist
Mar 9, 2023 · What really broke the Li Keqiang index was the covid-19 pandemic. The decline in retail sales, air travel and the property market was far more ...Missing: method | Show results with:method
[50]
[PDF] What 31 provinces reveal about growth in China
Table 5 presents the cross-correlation of the official national growth rates (nominal and real), the Li Keqiang index, two publicly available Business Cycle ...
[51]
In this chapter - Global Electricity Review 2023 | Ember
China's power demand increased by 4.4% in 2022, below the average growth rate since 2010 (6.5%), as China's zero-COVID policy continued to impact demand.
[52]
https://www.statista.com/statistics/264809/freight-traffic-in-china/
[53]
Is China's Five Percent GDP Growth Credible? - Yicai Global
Jan 13, 2025 · One well-known group of countables, the Li Keqiang Index, combines the information in the kilowatt hours of electricity consumption, the tonnage ...
[54]
New developments in Chinese power industry's green transition
Jan 15, 2025 · In 2023, China's total electricity consumption grew by 6.7%, and the primary energy consumption increased by 5.7%, compared with a 5.2% GDP ...
[55]
Financial Statistics Report (2023)
Jan 12, 2024 · 1. Broad money rose by 9.7 percent. At end-December, broad money supply (M2) stood at RMB292.27 trillion, increasing by 9.7 percent year on ...
[56]
Foresight 2025 Roland Berger China Annual Trends Report
Jan 6, 2025 · Electricity consumption, one of the key measurement indicators of the "Li Keqiang index", is expected to grow nearly 8% in 2024 from a year ago ...
[57]
Key findings – Global Energy Review 2025 – Analysis - IEA
In China, growth in energy demand slowed to under 3% in 2024, half the rate in 2023 and well below China's average annual growth of 4.3% in recent years.
[58]
Nation's rail network continued to break records in 2024
Feb 13, 2025 · In 2024, China's national railway handled a record 4.08 billion passenger trips, with daily traffic reaching a high of nearly 21.45 million.
[59]
[PDF] Listed banks in China 2024 report - EY
Jul 14, 2025 · The average growth in loans of large banks in 2024 was. 8.88%, with ABC recording the highest growth of 10.33%, and the other five banks each ...
[60]
China July bank loans unexpectedly contract for first time in 20 years
Aug 13, 2025 · On Tuesday, China announced it would offer interest rate subsidies for businesses in eight consumer service sectors, as well as for individual ...
[61]
China increases railway freight volumes in early 2025
Apr 16, 2025 · China increased railway freight volume to 970 million tons in Q1 2025, investing in infrastructure and expanding cross-border logistics.
[62]
China Energy Transition Review 2025 - Ember
Sep 9, 2025 · In 2023 the share of electricity in final energy consumption in China reached 32%, and is increasing by about 1 percentage point per year.Table Of Contents · Foreword · Key Takeaways<|control11|><|separator|>
[63]
China's Transitory Rebound | Weekly Economic Commentary
Jan 24, 2025 · The Li Keqiang Index – an unofficial proxy for China's economic growth, which comprises bank loans, electricity consumption and rail freight ...
[64]
The Land Of No Data - Benchmark
May 6, 2025 · Li's remarks, often referred to as the "Li Keqiang Index," have been widely cited by economists wary of politically calibrated statistics.China's Vanishing Data... · A Shift Amid Structural... · A Case Study In Statistical...<|control11|><|separator|>