Chinese leaders have been quick to put on a brave face after the ignominy of missing their economic-growth targets for first time since 1998. But while Premier Li Keqiang was telling global leaders in Davos not to worry about the economy, back at home the head of the country’s statistics bureau was rejecting claims China was already the world’s biggest economy. Official numbers may have underestimated China’s price levels and overestimated gross domestic product, National Bureau of Statistics chief Ma Jiantang said. This, he added, meant calculations the International Monetary Fund made ranking China’s economy ahead of that of the U.S. on a purchasing-power-parity basis were wrong. But if the IMF got China’s gross domestic product wrong due to understated prices, what else might be in error? It is well known that the ruling Communist Party lays great store in its track record of achieving GDP growth rates that the rest of the world can only dream of. This economic success helps underpin the legitimacy of China’s one-party state, now in its 65th year. These comments by Ma will fuel suspicions that a sizeable part of China’s growth miracle — particularly since 2008 and the nation’s massive stimulus — is simply counting inflation. Put another way, we are not measuring growth but rather the fact that things people were doing before now cost a lot more. Purchasing power parity (PPP) appears to be an elegant concept that measures GDP adjusted for the power money has in terms of a country’s local prices. The IMF calculates the Chinese economy is now worth $17.6 trillion, slightly higher than the $17.4 trillion it estimates for the U.S. Because money goes further in China, the IMF revised upwards the GDP figure from $10.3 trillion. But the idea that money still goes further in China looks highly questionable. In fact, not only are prices understated, as Ma suggests, but in many cases Chinese prices appear higher than those in the rest of the world. This conclusion comes not just from anecdotal experience, but from the sheer numbers of Chinese consumers who now choose to shop overseas. China’s recent consumer price index numbers hardly suggest an inflation problem: The index’s growth has lately been hovering around 2%-3% after coming down from 5.4% in 2011. Yet anyone who travels to China will notice substantial price increases in recent years. Given the rapid increase in property prices and years of double-digit wage growth and rapid credit expansion, it would be surprising if prices remained so subdued. For example, China’s 12th Five-Year Plan — which runs through the end of this year — mandated that the minimum wage should increase by an annual average exceeding 13%. In Hong Kong, the days of traveling to the Chinese mainland to take advantage of lower prices are long gone. Instead, there is an ever-rising flood of mainland tourists coming from the other direction. Last year, there were 47.2 million visitors from China buying up not just tax-free luxury goods, but even daily essentials. Japan is also experiencing an influx of shoppers from China, with tourist arrivals rising 83% in 2014. Chinese tourists are now the biggest spenders in the world, and were forecast to have spent $155 billion last year, according to the Chinese Tourism Academy. So perhaps we have another explanation for China’s low domestic-consumption figures, given that so much expenditure is taking place abroad. Other evidence of higher Chinese prices can be seen in the cost of pork, with hog prices swinging from being cheaper than in the U.S. to being more expensive. This may have helped persuade a Chinese company to buy Smithfield Foods of the U.S., the world’s biggest hog producer. High prices in China have also been the subject of action by the authorities, who have complained that foreign drug and automobile companies are selling their products at higher prices than they ask for abroad. In theory, China’s billion-plus population gives it the potential to have the largest market and best-scale efficiencies to drive prices down. But this also needs regulation that encourages competition and efficiency. We have yet to see if authorities are willing to reform and allow protected state-owned companies to face greater competition. Rating agency Fitch writes in a new report that China is in a race between reform and systematic risk. One conclusion is that if China’s GDP numbers have been flattered by understating prices on the upside, they will be more exposed on the downside as the property and investment bubble unwinds. Overall, China needs to lose its GDP obsession and target higher-quality growth. We may have seen a start, as Shanghai’s government has announced it will drop GDP-growth targets from its annual report. Craig Stephen