Can China’s Economic Data Be Trusted?

Published on Author Sam Wilson

The question of how China has had such high rates across the board in terms of economic growth over the years is one that seems to linger in the back of the mind when studying China. In a Chinese People’s Political Consultative Conference (CPPCC) session on March 4th, Dong Dasheng, the former Deputy auditor at China’s National Audit Office, spoke up admitting that the practice of faking economic data has been “rampant in China for years.” Dong explains that “many of the numbers are watery,” and that they spread over a wide scope: “including the growth rate of Gross Domestic Product (GDP), fiscal revenues, credit data, import and export data, and more.”

Dong explains that the current decrease that we are seeing in China’s economy is not a decrease but in fact a leveling out to the true numbers and elimination of the bad data. If this is the case, this would not be the first time that the Chinese have inflated their numbers to make thing seem better than they actually are. This was the case back before the Great Leap Forward, where the villages were reporting better crop yields than they harvested to better their village. However, this practice in turn caused a famine and hunger because the government was rationing out crops and grain that they did not have and thus there was a shortage. This can also be seen today for similar purposes today with in the regions of China.

“Earlier in February, Chinese state news media Xinhau reported that faking economic numbers is rampant among local governments. In order to bolster the political prospects for provincial leaders – whose promotions are tied to the appearance of robust growth – production data can be adjusted upward by orders of magnitude, and revenue counted from enterprises long bankrupt.”

If Dong’s telling’s are true, there will be some surprise but a lot of explanations of how China was able to attain and maintain such an elevated growth rate over the past several decades. Whether or not this discovery would have an economic effect or help calm those worried about China, I am unsure. Then again this could just be a sacrificial lamb that the Chinese government put to slaughter to reassure the people that the economy was doing no worse and that it was only the number crunchers to blame for this apparent decline.




2 Responses to Can China’s Economic Data Be Trusted?

  1. Listen to Mr. Miller on this, in class and in tomorrow evening’s lecture! The incentive component is clear, and this is a good reminder of that. Until promotions no longer rely on performance, or other such data, skepticism is warranted.

    I’ve stressed the institutional challenges of collecting data, including the obvious issue that building a group of technocrats and putting in place staff to survey and collate takes time and money, and is targetted at the sectors important at the time. We know more about Chinese agriculture than any other part of the economy.

    This is no less true for the US. What part of the government has the most economists and the best data? – agriculture!! Then comes manufacturing of established products. In contrast, comparatively little data are available on the service sector, particularly outside of retailing and formal financial services and the hospital end of healthcare.

    • I agree that this data can be difficult to calculate and keep track of, the question then becomes to what extent do we think the data is accurate. This comes down to a question of how much one is willing to trust the government/provider of information.

      In econometrics we looked at how, in the US, crime statistics can be hard to decipher because of the nature, accuracy, and depth with which they are reported. This seems to somewhat be the case as well with countries and their economic data, although the latter is much better regulated and monitored.