There were no great surprises last Friday when China’s statistics agency announced that the economy had grown 6.7% last year, almost dead in the centre of the targeted range set by Xi Jinping’s government.
Xi had reiterated the target would be met during his widely reported trip to Davos last week (see WiC352). As it turns out the economy grew a fraction faster than estimates – at 6.8% over the final three months – but full-year growth was 6.7%.
Those who doubt the veracity of China’s economic data said they were equally unsurprised by new revelations from Liaoning, a northern province, that it had been cooking its own GDP books for years.
How to assess the accuracy of China’s headline growth figure is not straightforward (even before the Trump team came up with the concept of ‘alternative facts’, some accused Chinese statisticians of something similar). Even taking the figure at face value, mind you, it is clear that last year the economy grew at the slowest rate for more than a quarter of a century. But as many local newspapers preferred to highlight, the official growth rate still beats other major countries, and as the economy gets larger the rate of the nation’s GDP increase is destined to lessen (mature economies don’t grow 10% a year).
Other positives from the media were that consumption accounted for almost three quarters of the increase (a signal that the economy is becoming less reliant on investment); while ‘strategic’ sectors like new energy and advanced manufacturing were outpacing more traditional industries. So Xinhua sounded confident when it warned that the “doom-mongers” were wrong to denigrate the country’s prospects. “The data gives them a reality check,” Zhang Liquan, a researcher at the State Council, told the news agency. “Observers of the Chinese economy need to take a comprehensive view as they cannot see the wood for the trees.”
The sceptics shot back that it’s the central government that needs the reality check, after the People’s Daily reported an admission from Chen Qiufa, the new governor of northeastern Liaoning, that his province had been falsifying its GDP performance for years. Chen didn’t say by how much the growth reports had been overstated, but he acknowledged that fiscal revenues had been inflated by at least a fifth by officials wanting to get promoted.
Famously, Premier Li Keqiang is said to have distrusted Liaoning’s GDP data when he was in charge of the province earlier in his career, relying more on statistics about railway freight, power usage and bank loans. Three years ago inspectors warned of “the prevalence of economic data fraud” in Liaoning and the province’s delegation to the National People’s Congress was disbanded last year after half of its delegates were implicated in a vote-buying scandal.
Perhaps that made Chen, the new broom, more confident about blowing the whistle on his predecessor, Wang Min, who was detained last year on suspicion of corruption.
Indeed, Chen’s approach bears comparison with a new chief executive blaming his predecessor for his company’s woes – but it was still big news. Liaoning meanwhile hasn’t yet given a figure for its performance in the final quarter, but it reported that its economy shrank earlier in the year.
Bigger-picture, the revelations will deepen suspicions that other provinces may have been doing something similar, although at least the disclosure suggests a move towards more accurate numbers.
Last weekend the Ministry of Finance tried to make the best of it by suggesting that “the province tried to reflect and spur itself on, and the situation is a warning to other regions”.
Ning Jizhe, boss of the National Bureau of Statistics has also admitted that it is “not uncommon” for local authorities to fake their feedback, although he defends the national data as “authentic” and “reliable”, presumably because the final calculations make allowances for fibbing from the frontline.
In fact, the statistics bureau already treats the locally reported sums with a large bucket of analytical salt – in 2012 the aggregate of provincially reported numbers tallied up to Rmb5.76 trillion more than the national GDP figure.
That said, it would be an easier argument for Ning to make if his predecessor Wang Baoan wasn’t under investigation for improper conduct himself. Still, the bureau says it has been trying to reduce its reliance on some of its less verifiable sources. It now monitors the industrial activity of 700,000 large enterprises directly and it has teams around the country that track local inflation data.
Attention now turns to the growth target for this year, which will be announced by Li Keqiang at the National People’s Congress in March. Most analysts expect the figure to be lowered slightly again, although getting closer to last year’s performance will be more of a challenge minus a surging property sector, which looks set for a quieter year.
To keep the economy moving forward, the government will need to keep the loans flowing as well, which is a concern for those who think that too much of the country’s growth is being funded by debt. Lenders made a record Rmb12.6 trillion ($1.82 trillion) of loans last year, the central bank has reported. According to Reuters, that was more than the peak lending of the credit-led stimulus that followed the global financial crisis in 2008.
Others have been wondering whether the GDP targets are still fit for purpose and if they could be scrapped as the central government looks for more of a focus on higher quality growth.
Another option is that the National Bureau of Statistics gets a revamp, becoming an independent statutory body with more say in demanding accurate information from other government agencies.
That looks a little unlikely – the growth figures are still too much of a political totem – but Beijing could opt to sideline the provincial statisticians further, bringing more of the data collection under its direct control.
“It’s like allowing athletes to report their own sporting achievements. No wonder there’s a problem!” China National Radio scoffed, saying that it’s laughable that local governments still have so much involvement. Netizens tended to take a bleaker view, because they hold their local officials in even lower regard than the media does. “The fraud was only uncovered because the original leader was arrested and now he is free to be trampled on,” one weibo cynic observed of the Liaoning situation. “But what about all those provinces where the leaders haven’t been detained?”
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