Economic output in China’s northeastern industrial province of Liaoning shrank by 23 per cent last year, according to official statistics — showing the extent to which officials had previously exaggerated performance in China’s struggling rust-belt.

The sudden drop in provincial gross domestic product is due to a fall in output in the fourth quarter of last year. However, the decline does not only reflect the state of the real economy — it is also the result of officials undoing the effects of previous over-reporting, analysts say.

China’s problem of industrial overcapacity has led to factories defaulting on debt, cuts in output and the planned lay-off of millions of coal and steel workers, all of which have hurt Liaoning’s steel-dependent local economy. Last April the province was the first in China to report a quarter of negative growth in seven years.