Reality Check
A daily explanation of what matters and what doesn't in the world of geopolitics.
April 29, 2016
By Jacob L. Shapiro
The national anti-corruption agency has reported that hundreds of statistics bureau employees provided preferential data for a fee.
When Wang Baoan, former director of China’s National Bureau of Statistics (NBS) – and vice minister of finance for two years before that – was detained in an anti-corruption investigation in China in January, we nodded our heads. We have made a point of explaining to our readers how unreliable statistics coming out of China can be. But when China’s Central Commission for Discipline Inspection (CCDI) revealed on its website Wednesday that it had found more than 300 NBS employees guilty of providing data for financial gain and demanded the return of some 3.23 million yuan (roughly $500,000), we could not help but be slightly amused. It’s one thing for Chinese President Xi Jinping to target the head of a national bureau – he has replaced many high-level officials since becoming president. It’s another for that bureau to be so filled with corruption and inaccuracy that the CCDI has to admit it.
One week before Wang was arrested, he spoke at a press conference in Beijing to announce that China’s GDP had grown by 6.9 percent in 2015 – an impressive figure for most nations’ economies, but bad enough to be China’s worst showing in 25 years. At the time, we pointed out that we were suspicious even of the 6.9 percent figure. Though we could not prove it, we believed the numbers to be much lower. Ironically, two weeks before the CCDI’s revelation, the NBS released data that purported to show that Chinese exports had increased year-on-year by a rate of 11.5 percent, which sent global markets into a tizzy.
The CCDI didn’t just announce that hundreds of NBS staff had taken money in return for providing official statistics. The investigation has also discovered that NBS funds were used not for data collection, but rather to rent fancy office rooms or vehicles, and that at least 19 people were given promotions within the bureau that were not deserved. This last point is in some ways the most telling about the problems inherent in “official” Chinese statistics.
The most important thing to understand about Chinese statistics is not that they are necessarily manipulated from the top. Certainly that happens too, as it does in every country in the world. Look no further than Wang’s example for that. But much of the manipulation of Chinese data actually comes from the lower levels. China is a country of over a billion people, but it has no unified or centralized statistical reporting system. Data is gathered at the local level and passed up the chain until it reaches the central government. The bureaucrats in charge of that system enjoy professional success and advancement when their numbers conform to the expectations and directives of the party. As a result, the numbers can be inflated to give the impression of success or moderated in order to avoid attention. Bureaucrats can also fabricate statistics for a reasonable fee.
Subscribe now
This is not an uncommon occurrence in China. Last December, for example, news agency Xinhua reported that a number of local officials in Liaoning province confessed that in 2012 they had inflated GDP growth numbers for the province to 9.5 percent. This was their explanation for why growth had plummeted to a reported 2.7 percent in 2015. Meanwhile, around the same time, China Daily reported that a local official in Heilongjiang province said investment figures into the province had been artificially boosted to the tune of $15.7 billion – or 20 percent of total investment into the province. China Daily also reported that a staffer in Jilin province said that often local officials would compete with each other for who had raised the most foreign investment – and that often those officials would count verbal agreements that never came to fruition, rather than only counting real investment.
China has the second largest economy in the world in terms of GDP. For the last two decades at least, China has served as the high-export, low-wage engine for economic growth throughout the entire world. The decline in Chinese demand is one of the root causes for the global exporters' crisis that we observe in the world today. Governments and corporations make decisions regarding China based on the statistics that they have in hand. Multiple times already this year, shortly after the NBS released extremely important data, the Chinese government felt a need to punish its bureaucrats because they were proffering unreliable data. These numbers are not just a curiosity. They have a tangible global financial impact.
This situation is also indicative of the larger struggle in which Xi and the Communist Party are engaged. Xi is carrying out a purge of the entire system – from the ranks of the People’s Liberation Army to such notable figures as Zhou Yongkang, a former member of the 17th Politburo Standing Committee and minister of public security. Xi also has the economic system in his crosshairs. Xi is moving to increase his personal control over the economy, while still removing officials who are deemed not reliable enough. For example, after 2016 started with a nosedive in the Chinese economy, Xi fired the former securities regulator Xiao Gang, simply for being incompetent, but not before weeks of confusion as to who was making decisions and what was actually happening. China’s bureaucracy is massive, and various bureaus or departments do not always communicate well or even share the same goals.
Xi may be attempting to harmonize the situation by imposing a sense of order, hence the very public manner in which the investigation of the NBS has been carried out and the CCDI’s conclusions have been revealed. The CCDI is the main instrument Xi has depended on to carry out his anti-corruption purges, so its role in this is notable. The CCDI’s report could be read hopefully by those who watch China closely because it could portend a real push on the part of the central government to insist on data and statistics that are more reliable. However, this is not a process that will be completed in a year, or even in ten years. There is institutional inertia stretching back many decades to contend with, and the fundamental challenge that comes with governing such a diverse and sprawling population, hundreds of millions of whom live in poverty.
China’s export miracle is at an end, and it is widely accepted that China must now fundamentally restructure its economy to redistribute wealth from the rich coastal provinces to the interior provinces and to encourage domestic consumption. However, not even Xi has access to accurate statistics about his own economy. That small fact bears testament to just how monumental a challenge China is facing in reshaping the way it does business.
In its report, the CCDI failed to mention whether the employees of the NBS who were guilty of giving information in return for financial gain were giving accurate or inaccurate data. As I was thinking about that, I was reminded of a framed picture my father, who is a professor, keeps on his desk for students who come to visit his office hours. “Answers: 25 cents. Answers (requiring thought): 50 cents. Answers (correct): 1 dollar. Dumb looks are still free.”
A daily explanation of what matters and what doesn't in the world of geopolitics.
April 29, 2016
By Jacob L. Shapiro
The national anti-corruption agency has reported that hundreds of statistics bureau employees provided preferential data for a fee.
When Wang Baoan, former director of China’s National Bureau of Statistics (NBS) – and vice minister of finance for two years before that – was detained in an anti-corruption investigation in China in January, we nodded our heads. We have made a point of explaining to our readers how unreliable statistics coming out of China can be. But when China’s Central Commission for Discipline Inspection (CCDI) revealed on its website Wednesday that it had found more than 300 NBS employees guilty of providing data for financial gain and demanded the return of some 3.23 million yuan (roughly $500,000), we could not help but be slightly amused. It’s one thing for Chinese President Xi Jinping to target the head of a national bureau – he has replaced many high-level officials since becoming president. It’s another for that bureau to be so filled with corruption and inaccuracy that the CCDI has to admit it.
One week before Wang was arrested, he spoke at a press conference in Beijing to announce that China’s GDP had grown by 6.9 percent in 2015 – an impressive figure for most nations’ economies, but bad enough to be China’s worst showing in 25 years. At the time, we pointed out that we were suspicious even of the 6.9 percent figure. Though we could not prove it, we believed the numbers to be much lower. Ironically, two weeks before the CCDI’s revelation, the NBS released data that purported to show that Chinese exports had increased year-on-year by a rate of 11.5 percent, which sent global markets into a tizzy.
The CCDI didn’t just announce that hundreds of NBS staff had taken money in return for providing official statistics. The investigation has also discovered that NBS funds were used not for data collection, but rather to rent fancy office rooms or vehicles, and that at least 19 people were given promotions within the bureau that were not deserved. This last point is in some ways the most telling about the problems inherent in “official” Chinese statistics.
The most important thing to understand about Chinese statistics is not that they are necessarily manipulated from the top. Certainly that happens too, as it does in every country in the world. Look no further than Wang’s example for that. But much of the manipulation of Chinese data actually comes from the lower levels. China is a country of over a billion people, but it has no unified or centralized statistical reporting system. Data is gathered at the local level and passed up the chain until it reaches the central government. The bureaucrats in charge of that system enjoy professional success and advancement when their numbers conform to the expectations and directives of the party. As a result, the numbers can be inflated to give the impression of success or moderated in order to avoid attention. Bureaucrats can also fabricate statistics for a reasonable fee.
Subscribe now
This is not an uncommon occurrence in China. Last December, for example, news agency Xinhua reported that a number of local officials in Liaoning province confessed that in 2012 they had inflated GDP growth numbers for the province to 9.5 percent. This was their explanation for why growth had plummeted to a reported 2.7 percent in 2015. Meanwhile, around the same time, China Daily reported that a local official in Heilongjiang province said investment figures into the province had been artificially boosted to the tune of $15.7 billion – or 20 percent of total investment into the province. China Daily also reported that a staffer in Jilin province said that often local officials would compete with each other for who had raised the most foreign investment – and that often those officials would count verbal agreements that never came to fruition, rather than only counting real investment.
China has the second largest economy in the world in terms of GDP. For the last two decades at least, China has served as the high-export, low-wage engine for economic growth throughout the entire world. The decline in Chinese demand is one of the root causes for the global exporters' crisis that we observe in the world today. Governments and corporations make decisions regarding China based on the statistics that they have in hand. Multiple times already this year, shortly after the NBS released extremely important data, the Chinese government felt a need to punish its bureaucrats because they were proffering unreliable data. These numbers are not just a curiosity. They have a tangible global financial impact.
This situation is also indicative of the larger struggle in which Xi and the Communist Party are engaged. Xi is carrying out a purge of the entire system – from the ranks of the People’s Liberation Army to such notable figures as Zhou Yongkang, a former member of the 17th Politburo Standing Committee and minister of public security. Xi also has the economic system in his crosshairs. Xi is moving to increase his personal control over the economy, while still removing officials who are deemed not reliable enough. For example, after 2016 started with a nosedive in the Chinese economy, Xi fired the former securities regulator Xiao Gang, simply for being incompetent, but not before weeks of confusion as to who was making decisions and what was actually happening. China’s bureaucracy is massive, and various bureaus or departments do not always communicate well or even share the same goals.
Xi may be attempting to harmonize the situation by imposing a sense of order, hence the very public manner in which the investigation of the NBS has been carried out and the CCDI’s conclusions have been revealed. The CCDI is the main instrument Xi has depended on to carry out his anti-corruption purges, so its role in this is notable. The CCDI’s report could be read hopefully by those who watch China closely because it could portend a real push on the part of the central government to insist on data and statistics that are more reliable. However, this is not a process that will be completed in a year, or even in ten years. There is institutional inertia stretching back many decades to contend with, and the fundamental challenge that comes with governing such a diverse and sprawling population, hundreds of millions of whom live in poverty.
China’s export miracle is at an end, and it is widely accepted that China must now fundamentally restructure its economy to redistribute wealth from the rich coastal provinces to the interior provinces and to encourage domestic consumption. However, not even Xi has access to accurate statistics about his own economy. That small fact bears testament to just how monumental a challenge China is facing in reshaping the way it does business.
In its report, the CCDI failed to mention whether the employees of the NBS who were guilty of giving information in return for financial gain were giving accurate or inaccurate data. As I was thinking about that, I was reminded of a framed picture my father, who is a professor, keeps on his desk for students who come to visit his office hours. “Answers: 25 cents. Answers (requiring thought): 50 cents. Answers (correct): 1 dollar. Dumb looks are still free.”
No comments:
Post a Comment