Build a bridge, pull it down, rebuild — the Chinese way to ramp up GDP

An outspoken Communist Party official in China has confirmed long-held suspicions that GDP data was being massaged and exaggerated by regional party leaders to show higher economic growth, in the process “squandering social resources.”

In a brutally honest and searing speech recently, Wang Yang, the reformist-minded party secretary of Guangdong province in southern China, laid bare the dishonest means party leaders at the provincial level were employing “to polish their numbers.” Since Wang is one of the few provincial party leaders who is also a member of the decision-making central Politburo, his words — and the fact that even the official media has reported them — is being seen as a signal that Beijing is wary of the accuracy of GDP data reported by the provinces.

“Some of our GDP data sure looks rosy,” Wang told party officials. “But they do not amount to growth of social wealth; in fact, social resources are being  wasted to show GDP growth.” For instance, he said, provincial party officials build a bridge, which contributes to GDP; they then “dismantle” and rebuild the bridge, each time contributing to GDP. “We may have boosted our GDP this way, but this is a huge waste of social resources.”

Likewise, he said, some regional governments registered GDP growth by encouraging “polluting industries”, and then showed even higher growth by cleaning up the pollution.
Wang said that such practices, which went against “the laws of a market economy”, were causing him deep disquiet. “Amidst the economic downturn, when everyone is eager to show ‘rosy’ numbers, all manner of backward productive forces are being revived,” he said.

Chinese policymakers have set a target of 8% GDP growth for this year, and going by the 7.9% GDP growth reported for the first half of 2009, that looks like it will be achieved. But independent economists have expressed scepticism about the authenticity of the official data (Is China faking economic recovery? DNA Money, June 26, 2009).

Others have voiced concern that an excessive preoccupation with the pace of growth (as opposed to the quality of growth) was spawning structural distortions in the Chinese economy (‘China should get rid of its GDP growth target’, DNA Money, July 25, 2009).

Indicatively, the provincial GDP data for the first half of 2009, released by China’s 31 provinces over the past week, adds up to 1 trillion yuan higher (or about 10% more) than the national GDP data released by Beijing earlier this month. Strikingly, 24 of the 31 provinces reported growth rates higher than the national average —- which, while not statistically impossible, is highly improbable, according to economists.

Party leader Wang argues that instead of artificially boosting GDP data, provincial leaders should focus on “restructuring and transforming” the industrial structure —- that is, move away from labour-intensive, low-technology, polluting and energy-inefficient industries.