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In the eternal debate about the validity of China's economic data, this is an interesting new development. For years the sum of provincial GDP exceeded national GDP by a big margin--indicative of falsification. But look at the newest data: the gap was nearly gone last year. (1/) 
To make that clearer, here's the GDP gap in percentage terms. From 2005-2017, the sum of provincial GDP was, on average, more than 5% bigger than China's national GDP. Last year, it was just 1.6% bigger. (2/)
How has this happened? Mechanically, it's all about nominal growth. Reported provincial real growth rates still exceeded the national growth rate (China grew 6.6% last year; its provinces, on average, 7.1%). But there have been huge adjustments in nominal GDP. (3/)
Look at the implied GDP deflators of the provinces vs national GDP deflator last year. (GDP deflator measures the difference between nominal and real GDP.) The vast majority of provinces, including almost all the big ones, had smaller deflators than the national average. (4/)
Same thing happened in 2017, when the gap between provincial GDP and national GDP started closing. One possibility is that China's provinces have been revising down their nominal GDP estimates, while still reporting strong real growth rates. (5/)
The appearance of negative GDP deflators in the past has been a red flag of provinces cooking the books: ie, Inner Mongolia, Liaoning, Tianjin. Based on this data, there are plenty of other suspects out there, including some big ones: Shandong, Chongqing and even Shanghai. (6/)
The big question is what this means for the quality of Chinese data. A negative interpretation is that the growth slowdown was a fair bit worse than reported last year, and that it was masked by national data "catching up" to inflated provincial estimates. (7/)
A positive interpretation is that provincial GDP data are finally improving. If these are across-the-board revisions, effectively re-setting the base, that would be the case. I'm going to stick my neck out and say... it's probably a bit of both. (8/8)
