In difficult times as well as decisive political moments like this year, figures and statistics should be taken with a grain of salt.
China’s economic data is published by several government agencies. Among the most important are the People’s Bank of China, the Ministry of Finance and the Customs Administration. The numbers they publish are generally considered trustworthy, except for politically highly sensitive data on the debt situation of local governments.
It is the figures from the National Bureau of Statistics, which are responsible for the bulk of economic statistics, that caused the most frustration.
It is an open secret that the most important statistics have to be approved by the State Council of the People’s Republic before they are published. The last time China vigorously “revised” its economic figures was in 1998 when the Asian crisis and huge floods throughout the region shattered the eight percent growth target announced by the government in Beijing. The National Bureau of Statistics ultimately spoke of a growth rate of 7.8 percent. However, it is estimated that growth was actually between five and six percent.
Many ways to make numbers pretty
There are many ways to cook the books. Some economic growth in one quarter could be moved to help a different poor quarter. Statistics as old as ten years ago could potentially be modified to iron out inconsistencies among the figures.
This year, according to the National Bureau of Statistics, China’s gross domestic product grew 4.8 percent year-on-year in the first quarter, while the announced growth target for the full year is 5.5 percent. With rampant Covid-triggered lockdowns across the country, a sluggish real estate sector, much subdued private businesses, and lackluster consumer sentiment, the authenticity of this figure is widely doubted.
With the lockdowns getting worse in the second quarter, the market has lost any hope that the yearly target could be met. The government seemed to, in turn, decide not to tinker with the figures (too much) and announce a growth of 0.4 percent for the second quarter
To be fair, the quality of China’s statistics had been improving before the Covid pandemic. The largely meaningless “registered unemployment rate,” which did not take into account China’s enormous population outside the major cities, was replaced by a rate based on surveys of both urban and rural areas. A subcategory was even introduced for the unemployment rate of 16- to 24-year-olds.
Punishments for number fakers
The province of Liaoning and the provincial level city of Tianjin were reprimanded for publishing egregiously exaggerated economic statistics to polish the image of the local government leaders.
However, difficulties caused by the Covid pandemic and the running-up to the all-important 20th Congress of the Communist Party of China seemed to have triggered a relapse.
What is particularly frustrating is: whether you believe in the official figures or not, there is no way to prove them. The NBS never reveals its methodology in detail, apparently to give itself some leeway. No other institution has the legitimate mandate or ability to implement a separate system in parallel with the official one.
Taking other official figures for cross-examining is also not always feasible because the NBS doesn’t publish them consistently. For example, the figure for electricity generation, a key barometer for economic activity, has been missing from NBS reports since 2020. Publication of values for the coal price, another indicator, is also suspended as soon as the price is too high.
Third-party institutions may be able to produce some indicators, such as the construction of new infrastructural projects, which could be gathered through satellite images, and total truckload volumes. But the institutions generally don’t dare to publish these figures publicly to avoid contracting the official story. If they do, there could be consequences. The rationale given for the suspension is usually “to take a responsible attitude as the prices fluctuate abnormally.”
In August, an independent research institute published a report on regional real estate vacancy rates based on an independent survey. The report was later retracted under pressure.
Except for a small group of absolutely essential figures such as GDP, price indices and industrial output, the NBS would do cherry-picking for the other figures. Only good-looking ones will appear in its reports.
This resembles a not-so-fun game of hide-and-seek. Observers can only take comfort in the fact that the government’s selection of figures to be published can reflect their policy inclinations.
Problems exist not only in the economic sector
There is speculation that China has overreported its population growth in the past couple of years. The government has been very reluctant to abandon its one-child policy, even after the birth rate was excessively low. This hesitation could result in a fast aging population, which bodes ill for the economic and social prospects.
China allowed its citizens to have up to two children in 2015 and further raised the quota to three last year. Even so, the general willingness to have more than one child is still very low, thanks to the painfully high cost of raising children.
With so many statistics getting tinkered with or simply forged, are the leaders and policy-makers not somewhat fooling themselves? Well, to some extent, that may well be true. But the figures are just one reference for the politicians in making their decisions. They also know very well about all the games of statistics.
But for many others, it gets tricky when the figures for the world’s second-largest economy are not reliable. Investors, economists, China researchers have to mobilize all these senses and wisdom to fumble around about the real picture behind the façade.