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Tuesday, 30 December 2008
No Room for Lies in Economic Statistics
Mainland statisticians have been steadily earning respect for drawing an increasingly accurate picture of the nation’s economic development. That is a marked contrast to six years ago, when 60,000 violations of statistics laws were reported.
Mainland statisticians have been steadily earning respect for drawing an increasingly accurate picture of the nation’s economic development. That is a marked contrast to six years ago, when 60,000 violations of statistics laws were reported. Despite the shift, those in charge of compiling national figures still have an uphill struggle because of flawed practices at the provincial and lower levels. Given the importance of faithful reporting, it is good that prominent lawmakers have called for the process to be centralised.
Putting the collection of local gross domestic product data in the hands of the National Bureau of Statistics makes perfect sense. Officials in the provinces have a tradition of inflating numbers to boost their career prospects. Centrally planned economies such as the mainland’s have a habit of massaging production data to make themselves look good, and lower-ranking officials are all too eager to set the right tone. Former central bank chief and National People’s Congress Standing Committee member Wu Xiaoling also pointed out that accurate accounting was virtually impossible within provinces because of the manner in which goods, resources and services flowed freely throughout the country.
When the sum of all these parts is added up, a clear picture of the problem emerges. There is generally a 2 or 3 percentage point difference between the national GDP growth figure and that calculated by adding the weighted average of the provincial GDP growth data. The discrepancy is even greater if the figures are taken at the prefecture or county level. There was a gap of 1.25 trillion yuan in the total value of GDP in the national and provincial data sets in the first half of last year, for example.
Letting tampering get out of hand has a substantial cost to society. Infrastructure and social programmes are based on statistics. Exaggerated growth figures in the wake of the 1997-98 Asian financial crisis gave the impression that the economy had vastly strengthened, despite there being substantially lower electricity consumption. When growth actually did surge, the lack of investment in electricity production resulted in severe power shortages. Apart from the inconvenience to daily life, the blackouts caused factories to miss order deadlines and cut jobs.
Big investment banks have developed their own measures of the mainland’s economic output and have detected a greater degree of volatility than that shown by official figures. This implies tampering at the national level, with statistics being smoothed to give the impression of the steady growth that authorities are so eager to maintain. Nonetheless, there has been a significant shift in attitude in the past two years. The statistics bureau has put in place an independent survey system and makes personnel decisions at the provincial level. Mainland economists are more sceptical about official data and openly question figures they find dubious.
The mainland is moving in the right direction on statistics collection, but more clearly needs to be done. Creating a culture of honesty takes more than merely increasing the penalties for those found to have falsified data. Ranking legislators have recognised the problem and asked for substantial changes. For the nation’s sake, these should be considered so that authorities - and the world - can better understand and deal with the changes taking place in the world’s fastest-growing major economy.
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No Room for Lies in Economic Statistics
30 December 2008
Mainland statisticians have been steadily earning respect for drawing an increasingly accurate picture of the nation’s economic development. That is a marked contrast to six years ago, when 60,000 violations of statistics laws were reported. Despite the shift, those in charge of compiling national figures still have an uphill struggle because of flawed practices at the provincial and lower levels. Given the importance of faithful reporting, it is good that prominent lawmakers have called for the process to be centralised.
Putting the collection of local gross domestic product data in the hands of the National Bureau of Statistics makes perfect sense. Officials in the provinces have a tradition of inflating numbers to boost their career prospects. Centrally planned economies such as the mainland’s have a habit of massaging production data to make themselves look good, and lower-ranking officials are all too eager to set the right tone. Former central bank chief and National People’s Congress Standing Committee member Wu Xiaoling also pointed out that accurate accounting was virtually impossible within provinces because of the manner in which goods, resources and services flowed freely throughout the country.
When the sum of all these parts is added up, a clear picture of the problem emerges. There is generally a 2 or 3 percentage point difference between the national GDP growth figure and that calculated by adding the weighted average of the provincial GDP growth data. The discrepancy is even greater if the figures are taken at the prefecture or county level. There was a gap of 1.25 trillion yuan in the total value of GDP in the national and provincial data sets in the first half of last year, for example.
Letting tampering get out of hand has a substantial cost to society. Infrastructure and social programmes are based on statistics. Exaggerated growth figures in the wake of the 1997-98 Asian financial crisis gave the impression that the economy had vastly strengthened, despite there being substantially lower electricity consumption. When growth actually did surge, the lack of investment in electricity production resulted in severe power shortages. Apart from the inconvenience to daily life, the blackouts caused factories to miss order deadlines and cut jobs.
Big investment banks have developed their own measures of the mainland’s economic output and have detected a greater degree of volatility than that shown by official figures. This implies tampering at the national level, with statistics being smoothed to give the impression of the steady growth that authorities are so eager to maintain. Nonetheless, there has been a significant shift in attitude in the past two years. The statistics bureau has put in place an independent survey system and makes personnel decisions at the provincial level. Mainland economists are more sceptical about official data and openly question figures they find dubious.
The mainland is moving in the right direction on statistics collection, but more clearly needs to be done. Creating a culture of honesty takes more than merely increasing the penalties for those found to have falsified data. Ranking legislators have recognised the problem and asked for substantial changes. For the nation’s sake, these should be considered so that authorities - and the world - can better understand and deal with the changes taking place in the world’s fastest-growing major economy.
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