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The Chinese government announced reforms requiring local governments to measure economic numbers the same way the national authorities do. For decades, skeptics have accused China of doctoring its GDP and other statistics.
Questions arose during the Asian financial crisis of the late 1990s, when economies across the region collapsed, yet China appeared to go statistically unscathed, said Tom Orlik, chief economist for Bloomberg and author of “Understanding China’s Economic Indicators.”
Since then, provincial governments have frequently reported GDP growth numbers that added up to a far bigger total than the overall national figure. For years, local officials have been rewarded in the Chinese Communist Party in part due to their local economic performance.
“They have in the past been promoted on the amount of GDP that they can generate,” said Sara Hsu, chief executive of China Rising Capital Forecast. “So they have an incentive to inflate the numbers.”
In recent years, the Chinese central government has sought to take over number counting from local authorities. As the argument goes, if the central government can go after dirty numbers, it can root out corruption.
But there’s another statistical problem in China cited by many: a tendency for Chinese numbers on GDP growth, housing and employment to rise and fall surprisingly smoothly compared to other middle-income countries.
“They can go through periods of very strong growth,” said Derek Scissors, economist at the American Enterprise Institute think tank, “but if capital decides this is a bad risk and it leaves, you get a crash. This is very normal for everybody — except China.”
Scissors thinks China’s growth rate today is two percentage points lower than the official rate of 6.0%. Optimists argue GDP numbers from Beijing match up well with indicators including electricity use and bank loans.
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