This scepticism is more than justified. Does the old adage from school "you are only cheating yourself" apply to the most populated country on earth?
Let us imagine that the numbers are wrong. What harm can it do? It might artificially inflate confidence that may in turn cause a virtuous circle of growth and prosperity? Can it be that easy or is it simply storing up a whole lot of trouble for later?
I have posted this article in full as it makes for important reading. This is an issue I have posted about on this blog on numerous occasions.
The "oil use" issue is important as these numbers are harder to fake. Can oil use fall and output rise by so much? previous correlations suggest not.
Can 100,000 statisticans be wrong? This number of statisticans might even help the UK get its numbers right.
China's Numbers Questioned [Radio Free Asia]
BOSTON—China’s economic growth has won praise in the midst of worldwide recession, but controversy continues to swirl around the accuracy of the government’s claims.
In the run-up to last week’s meetings of the U.S.-China Strategic and Economic Dialogue in Washington, China’s National Bureau of Statistics (NBS) released data showing a strong recovery in the second quarter.
“China is leading the world economic recovery based on fresh data from the first half of the year,” the official Xinhua news agency said, citing an interview with C. Fred Bergsten, director of the Petersen Institute for International Economics in Washington.
According to NBS data, China’s GDP expanded by a robust 7.9 percent in the second quarter from a year earlier, boosting growth to 7.1 percent in the first half of 2009.
But the figures have raised doubts on several counts, most notably because the NBS also reported that China’s first-half exports plunged 21.8 percent.
In an economy driven by exports for the last decade, such a steep decline might have been expected to come as a blow to GDP.
Economists have also questioned NBS reports that industrial output rose 7 percent in the first half, while power generation dropped 1.7 percent.
The government doesn’t report oil demand, but Platts Commodity News estimates that it fell less than 1 percent during the period, while Chinese customs data show crude imports up less than 1 percent.
In May, the Paris-based International Energy Agency noted the lag in oil use and challenged the GDP growth data for the first quarter, calling it “another Chinese riddle.”
The NBS dismissed that criticism as “groundless” in a comment on its Web site.
The latest GDP figures have also been met with deep skepticism from some economists, prompting the NBS to take on its critics in similarly strong terms.
In a Web posting on July 16, Derek Scissors, an economist and research fellow at the conservative Heritage Foundation in Washington, blasted the accuracy of the NBS reports.
“It is reasonable to simply dismiss Chinese economic results,” Scissors wrote.
“Despite starkly limited resources and a dynamic, complex economy, the State Statistical Bureau again needed only 15 days to survey the economic progress of 1.3 billion people.”
“Revisions are a farce: No growth figure has ever been revised down, and announcements of upward revisions are incomplete to the point of uselessness,” he said.
“At best, earlier activity is measured. At worst, results are manufactured to suit the Communist Party.”
Thousands of statisticians
The NBS responded in a lengthy interview with an unnamed official on the English-language China Daily Web site, disputing some of Scissors’ conclusions as “wrong.”
The NBS employs “more than 100,000 statisticians” to compile reports quickly, the official said, adding that “we did not see any sense or kindness in Mr. Scissors’ article.”
In an interview, Scissors said that China’s economy clearly strengthened somewhat in the second quarter, but he argued that the NBS growth data is “internally inconsistent” and “can’t be accurate.”
Scissors rejects NBS arguments that China’s gains in energy efficiency can account for such strong GDP growth when power use has declined.
“The spread between the drop in power consumption and the size of production and GDP growth is too big,” he said.
Other explanations of the data have proved difficult, because the NBS has also reported an 8.7 percent rise in coal production, despite the dip in power generated from coal.
The contradictions may reflect adjustments to inaccurate reporting in the past, Scissors said.
“Their data going back 10 or 15 years is flawed, so you can’t really trust what they’re saying at any particular time because they’re building on a bad base,” he said, citing a similar conflict between falling exports and rising GDP.
“Something doesn’t fit here. What exactly it is, it’s hard to determine.”
Energy experts told RFA they hadn't seen previous cases of such strong economic growth without corresponding power demand.
“It would be very unusual to have rather substantial growth in GDP coupled with a substantial decline in electric power consumption,” said Robert Ebel, senior adviser to the energy and national security program at the Center for Strategic and International Studies in Washington.
“They’re trusting people not to raise questions.”
Mikkal Herberg, research director for energy security at the Seattle-based National Bureau of Asian Research, said that such large disparities cannot be explained by exaggerated energy efficiency gains.
“These kinds of improvements in efficiency in a matter of six or 12 months—that’s just not consistent with energy- intensive industries and the slow turnover of capital stock,” said Herberg, who believes the reporting has grown more unreliable with changes in China’s economy.
“The quality of the information becomes very poor when things are very fluid and changing very quickly,” he said.
The analysts all urge caution in relying on NBS statistics in deciding U.S. policy issues, such as negotiating a new climate change treaty or forecasting an end to the global recession.
“I would hope that our embassy in Beijing is doing what they can to provide people in the government with what they believe is the correct assessment of what’s going on,” Ebel said.
Scissors also responded to the NBS charge that his criticisms were not offered in the spirit of “kindness.”
“Economists all over the world love transparency. It’s what we call truth,” he said, adding that his concern is for better economic policy.
“I want China’s economy to thrive and benefit the world economy, so in that sense, there’s plenty of kindness.”
“There’s not a lot of kindness directed toward the National Bureau of Statistics because I’m very frustrated with them and, of course, so are many other people who follow Chinese data,” Scissors said.
Although the NBS has objected to criticism, the government recently enacted a revised statistics law to toughen penalties for falsifying data.
On July 23, Xinhua also reported that China would take part in a U.S. $4 million (27.3 million yuan) U.N. program to help Asian countries improve statistical reporting.
In Washington, the Strategic and Economic Dialogue meetings concluded July 28 with accords for cooperation on environmental and economic issues but without major breakthroughs in either area.