In the summer of 2013, at a time when the topic of soaring US debt was still paramount to the US public (total debt is now a far more ludicrous, and gargantuan, $19.3 trillion but nobody cares since all the central banks are monetizing global debt at an unprecedented pace and investors are happy to frontrun them, thus keeping yields low) the US surprised everyone by "increasing" GDP, and thus reducing the debt/GDP ratio which was at about 100%, in a very simple way: it changed the definition of GDP, in the process boosting GDP by about $500 billion, or 3%, with the flip of an Excel spreadsheet switch.

This is what we reported at the time:

The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development. Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output. Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, told the Financial Times that the update was the biggest since computer software was added to the accounts in 1999.

Fast forward three years later, when the biggest fabricator of economic data in the world, China, finally realized that its lowly disciple, the US Bureau of Economic Analysis, has overtaken it. And since China will never rest if it is upstaged in this particular area, China has announced that it too was about to adopt new methodology to assess the economic contribution of the various new sectors of the economy, said Xu Xianchun, a deputy head of the National Bureau of Statistics, cited by China Securities Journal. China's official GDP growth has been underestimated due to the emergence of this "new economy," he said.

Specifically, the NBS announced on July 5 that it will adopt the current System of National Accounts (SNA) 2008 standard by treating R&D expenditure as part of capital formation, or in other words, China will do in 2016 what the US did in 2013.

The outcome: billions in "economic output", retroactively created out of thin air as a result of growth that had previously not been accounted for.

How much growth is China about to add from a mere change in definitions? As it turns out not much (as China's GDP is measured in terms of Y/Y growth and not in absolute amount), but it will be sufficient to, as Goldman puts it, "eases stimulus pressures on the margin."

Or, just like in the case of the US, China will have suddenly grown more than it actually grew, even when in reality it may well have been contracting.

Here is the explanation of Goldman's Yu Song. 

Goldman's conclusion is somewhat troubling for the world's liquidity addicts as it means that instead of relying on trillions in new credit creation, China may tone it down to just hundreds of billions, and fill the gap with "optics." This means that as a result of this "non-GAAP" GDP adjustment, China will be able to get away with an even faster true growth slowdown as long as it can fabricate enough numbers to get away with it.

of course, it won't end there, because in the new normal, where the world may have already hit its debt capacity (as Citi recently speculated), when all else fails, one's economy will "grow" simply as a result of definition changes, changes which in the case of China, almost certainly make a minus sign into a plus.