China Said to Skew Data

Inflation may boost China's energy efficiency claims.
By Michael Lelyveld
coalmining305.jpg People working at a coal mine in Huo Lin Guo Le, in China's north Inner Mongolia region, Nov. 15, 2010.

China has used misleading statistics to claim success in its energy efficiency campaign, experts say.

Despite double-digit increases in power consumption, Chinese officials insist they are close to meeting their five-year goal of cutting 20 percent of energy use per unit of GDP by the end of 2010.

On Nov. 24, the National Development and Reform Commission (NDRC) said the energy-to-GDP ratio had dropped three percent in the first three quarters of the year, state media reported.

NDRC Vice Chairman Xie Zhenhua made the announcement at a green energy forum in Beijing before the global climate change conference that opened in Cancun, Mexico last week.

By adding the latest figure to the 15.6-percent savings reported for the previous four years, China appears to be within striking distance of its five-year target.

But analysts say the numbers look suspicious, since China has reported a far higher growth rate for power consumption than for GDP during the period.

Robert Ebel, senior adviser to the energy and national security program at the Center for Strategic and International Studies in Washington, said it is hard for China to argue that efficiency improved when power use increased more than the economy.

"There's only one way that I can think of, and it's that they're playing with the numbers," said Ebel. "How else can they do it?"

According to the National Bureau of Statistics (NBS) and the National Energy Administration (NEA), GDP rose 10.6 percent in the January-September period, while electricity consumption jumped 18 percent.

That would suggest energy efficiency has been getting worse rather than better this year.

Inconsistent data

Although information on total energy consumption has been sketchy, other indicators seem inconsistent with claims that energy use has been growing slower than GDP.

Production of coal, China's main fuel, rose 17.2 percent in the first three quarters, said Wang Min, Vice Minister of Land and Resources, according to the official Xinhua news agency.

Despite high production, the Ministry of Railways has warned of power shortages this winter because coal supplies have dropped to the "danger mark or even below" at generating plants. China's imports of coal soared 42.2 percent during the nine-month period, Xinhua said.

The debate over the "energy intensity" index is more than academic because China has argued that the international community should accept its statistics as valid.

The 20-percent efficiency target is seen as a test of China's pledge to cut greenhouse gas emissions by 40-45 percent from 2005 levels by 2020.

But Ebel said the discrepancies in reporting the energy figures make it hard to rely on China's accounting of carbon emissions.

"It will continue to raise questions," he said. "We've always had questions about manipulation of data to serve a purpose, whether political or not."

Different standards

Derek Scissors, research fellow for Asian economics at the Heritage Foundation, said China's reporting on efficiency is misleading because the government has used two different standards for reporting GDP.

When the NBS reports economic growth, it uses "real" GDP figures, that is, adjusted for inflation. But when the government reports energy efficiency data, it uses "nominal" GDP, which is boosted by inflation, Scissors said.

Because the nominal figures are higher, the government can claim that China is using less energy per unit of GDP.

"In energy efficiency calculations, inflation becomes their friend," said Scissors.

The difference in reporting standards has not been obvious over the past four years, when inflation was relatively low.

But with inflation running above the government's three-percent target for this year, the difference has become a significant factor, just as China is making its final push to meet the five-year goal.

In October, the country's consumer price inflation (CPI) reached 4.4 percent, a 25-month high. But it appears the government is using an even higher inflation factor for calculating the energy index than the official CPI.

"If you look at the gap between nominal GDP growth and real GDP growth as China reported it, it looks like there's a lot of inflation. And China doesn't give that number," said Scissors. "They give other numbers for measures of inflation that are a lot smaller."

The government is highly sensitive to social pressures from rising prices, which may account for the separate measures of inflation.

Scissors said the energy efficiency calculations suggest the government is using an inflation factor of about 11 percent.

The result is that China appears to be using different standards for both GDP and inflation, turning the energy efficiency calculation into a sleight of hand.

"This is all a game," said Scissors. "You're not allowed to report high inflation and you must report fast growth, and increasingly you must report that energy intensity is declining and efficiency is increasing."

"So, you use the number that's convenient in one category and then you drop it and report another number," he said.

Omitting statistics

This year, China has been adding to the uncertainty by failing to provide data that might make the discrepancies more obvious.

In mid-November, Reuters noted that the NEA had failed to provide a breakdown of power consumption figures by sector for the second month in a row, giving only a total. Scissors said the NBS has also omitted coal production figures from its monthly data since March.

The uncertainty may come as a challenge to a pending agreement on accepting China's accounting of carbon cuts for a climate accord to replace or renew the Kyoto Protocol.

Over the past year, U.S. officials have argued that reporting for a proposed treaty should be "measurable, reportable and verifiable," while China has insisted that any reviews should respect national sovereignty.

At last week's talks in Cancun, officials sounded a positive note on hopes for a compromise.

China's climate negotiator Su Wei said differences with the United States on the accounting issue "are not that huge," the Associated Press reported.

Under a plan advanced by Indian Environment Minister Jairam Ramesh, the reporting of developing countries would be part of a "facilitative process for transparency and accountability," but it would have "no punitive implications of any sort," The New York Times said.

It is still unclear how the compromise would deal with China's differing standards for measuring GDP.

Scissors said the experience with the energy efficiency index makes it impossible to rely on China's reporting.

The NBS already acknowledges that it adjusts the figures that it gets from provincial bureaus because of reliability problems, he said. Providing data for an international treaty may only magnify the problems.

"What Chinese number are you going to use?" asked Scissors. "Once we get a treaty, you've got extremely strong incentives for those numbers to get massaged."


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