China Curbs False Data

China denies falsifying data, but toughens law.
By Michael Lelyveld
2009-07-07
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BOSTON--Despite denials of wrongdoing, China has passed tougher penalties for falsifying economic data, citing numerous cases of inflated figures.

On June 27, China's "top legislature" adopted revisions to the country's statistics law, the official Xinhua news agency reported, in an apparent reference to the Standing Committee of the National People's Congress (NPC).

The amendments would impose "severe" but unspecified penalties on officials who "manipulate or fabricate data." Violators "could face the sack," the state-controlled, English-language China Daily said.

Wu Bangguo, chairman of the Standing Committee, was quoted as saying that the new law was "focused on coping with data fraud and deception." Ma Jiantang, director of the National Bureau of Statistics (NBS), said that fabrication and altered data have accounted for some 60 percent of violations in the past.

Data falsification has long been a problem among Chinese officials, who seek to meet government targets to qualify for promotions. In 2007, nearly 20,000 violations "were uncovered," China Daily reported in April.

In one case, the NPC reportedly discovered that officials in Chongqing municipality added a zero to the production figure of an enterprise to boost its output data tenfold. In 2004, the NBS found that local economic reports exceeded the national GDP total by 3.9 percent, inflating the figures by over 2.6 trillion yuan ($380 billion).

'Groundless' questions?

But in recent weeks, Beijing has objected strongly to foreign suggestions that its official reporting is inaccurate.

Most recently in May, the NBS dismissed questions as "groundless" after the Paris-based International Energy Agency (IEA) raised doubts about the reliability of China's economic growth figures.

In a monthly oil report, the IEA said that NBS claims of 6.1 percent GDP growth in the first quarter did not "tally" with lower oil and power use during the period. "Another possibility is that real GDP data are not accurate, and therefore should not be taken at face value," the IEA said.

At the time, the NBS slammed the suggestion, saying the IEA had failed to consider a sharp slowdown among China's energy-intensive industries. But Mikkal Herberg, research director of the energy security program at the Seattle-based National Bureau of Asian Research, said the new law may amount to an admission that the data is flawed.

"Everything indicates that they understand it extremely well," Herberg told Radio Free Asia. "When I talk to people in Beijing, they know this extremely well, and they're particularly frustrated with the quality of statistics coming in from the provinces."

Although Chinese official economic figures have been suspect for years, the problem in the past has been largely a domestic political concern. Local officials, seeking to curry favor with provincial governors and Beijing, have often pumped up their results to meet unrealistic central planning goals.

Larger effects

But as China has emerged as a larger force in the international market economy, the old practice has had larger effects.

Before last year's plunge in world oil prices, analysts looked closely at China's economic growth data to forecast global oil demand. Herberg said the figures have become less of a factor for oil prices in a weak market, but China also uses its GDP data to calculate its progress in improving energy efficiency.

The NBS has estimated that China has already cut energy use per unit of GDP by 10.1 percent between 2006 and 2008, taking it more than halfway to its 20-percent energy-saving goal for 2010 under the current Five-Year Plan.

China has cited its energy efficiency gains in talks with developed countries on a new treaty to fight global warming, rather than submitting to a cap on greenhouse gas emissions. But if China's GDP figures are inflated, so are the energy efficiency figures.

Herberg said Chinese officials are unlikely to concede that their reporting is unreliable before they negotiate a new global warming treaty at a U.N.-sponsored climate change conference in Copenhagen in December. If they did, developed nations might only increase the pressure for greater emissions controls.

"They're going to be very sensitive about this issue, but at the same time they're going to be constantly working to try to improve the quality of the statistical base," said Herberg.

The question remains whether developed nations should accept China's energy efficiency claims in the face of growing suspicions about accuracy.

"I think we have to look at what they offer and then look at how plausible those targets are," Herberg said.


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