Bad with numbers

Accurate statistics are hard to come by

Bad with numbers

Not captured by the statistics

Throughout China’s long history, numbers have been used by the country’s leaders to serve their political ends. This trend may have reached its zenith under Mao Zedong. His followers were told to cleanse the country of the ‘five’ black categories and the ‘four’ olds, to adhere to the ‘three’ loyalties and ‘four’ boundless loves and to let a ‘hundred’ flowers bloom (briefly).

Numbers still matter greatly in China, and that’s especially true of economic statistics. But rather like Mao’s own penchant for coining statistics (“95% of China’s bureaucrats are good”), the accuracy of the data is often open to question.

Foreign economists have long debated which (if any) Chinese statistics to believe. But within China itself there is soul-searching going on.

The New Century Weekly, for example, reports that there are serious doubts about the usefulness of unemployment data. It points out that in 2009 – which was “reckoned to be the most difficult year the Chinese economy has faced this century” – the registered urban unemployment rate was 4.3%. Meanwhile, in 2007 – when the economy was widely reckoned to be “overheating” – the rate hardly differed, at 4%. Why, asks the newspaper, has the rate hovered suspiciously close to 4% every year since 2002, in spite of differing economic conditions?

“Because the unemployment rate doesn’t reflect the true employment situation, it is both questioned by the public and almost loses its effectiveness as an indicator,” the newspaper complains.

The problem with the statistic is simple enough to explain: it excludes migrant workers. That’s because for the purposes of its calculation they don’t count as ‘registered’ urban employees. However, this ends up making a nonsense of the data. How can you exclude one of the biggest and most important labour groups? During the height of the financial crisis, almost 20 million migrants were put out of work (see WiC1). No one doubts that unemployment spiked sharply. Yet the government’s unemployment statistic told another (far more benign) story.

“The registered unemployment rate is not accurate,” admits a government official with the Ministry of Human Resources. “We also know that.” However, he doesn’t view it as a problem, since he told New Century the government doesn’t use it when setting macroeconomic policy.

So what does the government use? Its preferred stat is the ‘surveyed’ unemployment rate which, as its name suggests is devised from surveying relevant population samples. Those samples include migrant workers. So it offers a truer picture of the real state of unemployment.

This data goes only to the State Council and key government departments like the National Development and Reform Commission (NDRC). And for the moment, it’s practically a state secret.

However, good news is afoot. The government has recognised how unworkable the current arrangement is, and will publish the ‘surveyed’ unemployment rate next year.

And that’s not the only step forward. In February, the NDRC described its plan to reform GDP data. At present, China’s provinces make their own GDP calculations. The problem is that added together, they end up bigger than the central government’s ‘national’ figure. In the first half of 2009 local government numbers exceeded the country’s published GDP by Rmb1.4 trillion.

As Xinhua explains, that’s because local officials have a vested interest in boosting their local GDP numbers to look good and improve their promotion prospects. The upshot? It not only makes a mockery of the local GDP calculations but also helps cast doubt on the reliability of the national figure too.

So the NDRC plans a unified GDP calculation method that will eliminate the discrepancy and rein in local government number cruncher’s more creative instincts.

Cynics will hardly be pacified by the move, mind you. Even if all the provincial numbers add up to 8% GDP growth, it will not convince them that 8% is anything other than a ‘politically-inspired’ number (see WiC8, ‘Why Beijing is so fixated on 8% growth’).

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.