In a post earlier this week (China Has Surpassed Us), I wrote about how the size of China's real economy dwarfed America's.

That post also pointed out how China is no longer merely copying Western tech but has advanced frontiers on its own; this week's news about Chinese scientists reversing aging in monkeys is another example of that. 

Patrick Fitzsimmons's new piece in Palladium explains why the scoreboard number misleads: GDP (especially "real value-added" by industry) is constructed in ways that can make industrial decline look like progress. It's worth reading.

What Fitzsimmons Adds

The stat that flatters decline. Policymakers lean on "real value-added" to claim U.S. manufacturing is near records. Fitzsimmons shows how heavy use of deflators and "quality adjustments" can create paper growth even when unit volumes and domestic content stagnate or fall.

Why the math breaks intuition. Chain-weighting plus quality adjustments often raise today by pushing yesterday down, yielding implausible surges in "real" output for sectors like chips and autos despite weak physical throughput.

Less glamorous gauges say otherwise. If you look at BEA real gross output, the Fed's industrial production index, or BLS real sectoral output, U.S. manufacturing per capita is well below late-1990s/early-2000s peaks.

Dollar rankings ≠ capacity rankings. Nominal value-added rewards higher prices and IP rents; a country producing far more units at lower prices (and with deeper domestic content) can still "look" smaller in value-added terms.

Bottom line: clever accounting ≠ the factory floor. The map brightens while the shop lights dim.

Why This Strengthens "China Is Already Bigger"

If the U.S. counts a lot of high-price services and IP rents, while China counts a lot of high-volume production at lower margins, GDP will understate China's operational economy. Add three wedges:

Price-level wedge: Lower Chinese prices compress value-added per unit, masking real throughput.

Domestic-content wedge: U.S. "output" often embeds imported guts; China's supply chains run deeper at home.

Services overweight: U.S. GDP leans on sectors that don't translate into strategic, reproducible industrial capacity.