Here’s why people question Chinese economic statistics
We have good reason to question Chinese economic statistics, especially from provincial and other local governments, and not just because the government tells us to. Officials running those governments are assessed in part on their performance, which is measured in statistical terms. Those officials supervise the bureaucrats who produce and release the statistics.
In addition, China’s non-democratic government wants to control the flow of information about itself, which is, many suspect, why Alibaba, an Internet consortium with close ties to the Beijing government, recently announced it will purchase Hong Kong’s South China Morning Post.
In an article coming out in January in the British Journal of Political Science, I show that when leaders change, local GDP growth estimates jump more than electricity and other measured statistics — despite the fact that those other statistics ought to track with GDP. To put it more clearly, energy use and economic growth ought to be closely tied. But only improved GDP statistics will help local bureaucrats advance their careers. And so when those officially reported statistics diverge, one might assume that the GDP figures have been manipulated.
Local leaders are given GDP growth targets. Not so coincidentally, as a working paper by Zhang et al. shows, almost every provincial leader beats those targets. Below, a dramatic jump is seen at the target growth rate. Very few provinces report growth below the target, while many provinces report growth just above the target line. This pattern could be the result of “real” improvements in the economy. Alternatively, it could be the result of bureaucrats manipulating — or “juking” — the stats.
When Chinese government officials question their own statistics, the rest of us should as well. For example, in a cable released by Wikileaks, the U.S. Embassy described Premier Li Keqiang as “smiling” at “man-made,” unreliable GDP figures from Liaoning, which he was governing at the time.
If government leaders know about the problem, then why don’t they do anything about it?
That’s complicated. China’s political system after Mao was designed to produce economic growth. Central officials would monitor a few key statistics — GDP, fiscal revenue. The local officials who produced good numbers would be rewarded. The center intentionally limited its oversight of localities to give locals a free hand in generating growth. What this produced were good numbers — often real! — but also significant bads that were not counted, such as soil, air, and water pollution; non-performing loans; and roads to nowhere.
Changing that system means looking more carefully into the dark corners of local government. That makes it hard for the central government to distance itself from bad actors at local levels.
As with other anti-corruption initiatives, going after officials for juking the stats can only happen after publicizing the fact that the misconduct was happening in the first place. Rumors and general distrust of official statistics have to become documented facts.
Local officials today are blaming their current low rates of economic growth on juking the stats in prior years. It is not just GDP either; in 2013, one county government claimed to have collected 2.27 times more revenues than were actually received.
But it is not just China’s problem.
The Chinese expression used to describe this phenomenon is oddly appropriate for the holiday season: Injecting water into the statistics (注水数据), which is reminiscent of the 6 percent water that meat processors added to your Christmas ham to increase profit margins.
All this tells us how important statistics have become as a way of summarizing and dealing with our incredibly complex world.
Statistics are supposed to make sense of this world, and allow us to understand what is happening. However, as we rely more and more on statistics to judge who is doing well and who badly, we generate more and more incentives for people to play with numbers for their own advantage.
The interesting and fundamental question is how many of the statistics that we rely on are versions of Chinese bureaucrats’ numbers — gimmicked to further the producers’ self-interest rather than trying to capture underlying reality.
Jeremy Wallace is an associate professor of government at Cornell University. He is the host of the ChinaLab podcast and the author of Cities and Stability: Urbanization, Redistribution, and Regime Survival in China.