Sunday, 3 May 2009
Beijing Acts to Curb Statistics Cheating, Gain Credibility
To become a leader in the global economy, and to be the first among all countries to revive from the present crisis, is the mighty goal the country has set for itself. But for that to be believed beyond, and even within, China’s own borders will require the generation of some believable statistics, a prospect that has always proved illusive in this country. Exhibit A includes just revealed economic figures for the first quarter of the year that are triggering doubt after doubt, both publicly and privately.
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Beijing Acts to Curb Statistics Cheating, Gain Credibility
CSC staff, Shanghai
3 May 2009
To become a leader in the global economy, and to be the first among all countries to revive from the present crisis, is the mighty goal the country has set for itself. But for that to be believed beyond, and even within, China’s own borders will require the generation of some believable statistics, a prospect that has always proved illusive in this country. Exhibit A includes just revealed economic figures for the first quarter of the year that are triggering doubt after doubt, both publicly and privately.
Tom Orlik, a free lance writer in Shanghai, comments on China’s statistics system in his recent article How to Treat GDP Statistics in the Period of China’s Economic Slowdown. Mr. Orlik says in the article that although the National Bureau of Statistics (NBS), in a move towards international standards, plans to release month-to-month GDP statistics, those statistics, as always, are generated locally, and since the political perspective of local officials is closely tied to the appearance of economic growth in their areas, statistics tend to receive a bit, or sometimes a great deal, of polish, to the benefit of said local officials, but to the detriment of any reliability.
In February this year, there was a 360 billion yuan gap in total tax revenue between figures released by NBS and the Ministry of Commerce, prompting unavoidable doubts on said reliability of official statistics. There was a similar discrepancy in March statistics about the sudden rebound of imports and exports.
Shanghai recently announced, the fourth to the last among all provinces, 3.1% GDP growth in the first quarter. Government insiders say that, according to preliminary statistics, Shanghai’s first quarter GDP growth should have been negative, but figures, especially those pertaining to the service industry, received revision.
Shanghai’s service industry was said to have grown by 13% in the first quarter, according to which it contributed 60% of Shanghai’s total GDP. This is not credible as it stands, for the service industry usually contributes no more than 50% of Shanghai’s GDP.
Analysts, economists, and financial reporters all question the reliability of first quarter GDP statistics of several coastal provinces, some of which doubled the 6.1% figure of nationwide GDP growth. In the first two months of this year, China was seeing a double-digit decline in exports and state-owned and foreign-invested enterprise profits, and negative growth in power generation, PMI, PPI, and CPI. In fact, the economic decline in China has probably been much more serious than indicated by statistics released by the central government.
To keep their jobs, not to mention retain the possibility of promotion, local officials must maintain economic growth, always the most important indicator of performance for government officials. As local governments at all levels are often set improbable if not impossible goals, polishing up statistics has long been a tradition in the Chinese system.
The reliability of China’s economic statistics has never been so important. Since the outbreak of the financial crisis, China seems to be a ray of light for the global economy. Other countries have to rely on statistics released by the Chinese government in bulk commodities, RMB rate, exchange rate-related financial transactions, and the global coordination in economic stimulus.
NBS Director Ma Jiantang has complained repeatedly about the distortion in statistics. Ma said fake statistics happen in some areas and departments. Leaders intervene in statistics, and statistics specialists are forced to fake statistics, or do so on their own initiative.
In fact, statistics cheating is drearily common among local governments. According to Li Deshui, former NBS director, during 2001 and 2003, faked statistics accounted for 60% of total.
NBS, the Ministry of Human Resources and Social Security, and the Ministry of Supervision jointly released Rules on Punishment for Violation of Laws in Statistics, China’s first rules on the subject, listing four types of statistics cheating: revising statistics without permission, or making up statistics; forcing or ordering statistics departments or individuals to revise or make up statistics or refuse to report statistics; retaliation against individuals who refuse to issue false statistics; and retaliation against individuals who report statistics violations. According to the new rules, leaders who fail to discover statistics cheating in governments or departments, or refuse to correct faked statistics and cause serious results, will be warned, degraded, or even dismissed.
If these rules are actually enforced, Chinese statistics may gain a bit of unaccustomed credibility.
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