Yet again, China GDP numbers don’t add up

Barely a week after China wowed the world with stunning GDP growth statistics for the third quarter of this year, a vastly different set of data from the provinces has revived long-held doubts about the authenticity of Chinese economic numbers.

Last week, officials at the National Bureau of Statistics, the central, national-level statistical agency in Beijing, reported that China’s GDP for the first nine months of this year was 21.78 trillion yuan.

But when GDP data from the individual provinces was added up, it was about 2.5 trillion yuan higher than - or more than 11.5% in excess of - the number released by the NBS.

“There is a gap between the national and provincial level statistics,” acknowledges NBS official Peng Zhilong. “This is a chronic problem.” In fact, the gap may well have been more yawning had not NBS officials directed half of China’s 31 provinces, autonomous regions and municipalities to slash their “artificially high” GDP data at an October 19 meeting of statistical officials.

There had been a similar discrepancy between the national and provincial-level data for the first six months of the year: The provincial data then was about 1 trillion yuan higher than then national GDP data released by Beijing.

A reformist-minded Communist Party party from Guangdong province in southern China had blown the whistle on the “dishonest means” employed by regional-level officials to massage GDP statistics - or “add water”, as they say in Chinese - with an eye on “performance-based promotions”.

Indicatively, the central NBS data showed that China’s overall GDP grew 7.7% in the first nine months; at the provincial level, however, 18 provinces reported double-digit growth over the same period. Only three administrative units recorded growth rates lower than the national average.

Chinese officials reason that accounting discrepancies at various levels may account for this statistical divergence. “China’s statistical methodology and systems are flawed,” says Ye Qing, deputy director of the Hunan provincial statistical bureau. “It is impossible to eliminate duplication, which is why the aggregated data is inconsistent with the national accounts.”

But central-level statistical officials are less forgiving. Provincial-level officials frequently “add water” to GDP data, complained NBS commissioner Ma Jiantang in August. Although he didn’t specify the reasons for officials overstating data, it’s widely believed that such massaging is done to show strong headline numbers and open up officials’ career path within the Communist Party.

In particular, Chinese officials are under pressure to meet the 8% growth target set for this year in response to the collapse in consumer demand from developed economies, which impacted Chinese exports severely. Beijing unveiled a 4 trillion yuan stimulus package, and commercial banks resorted to an orgy of bank lending, to stimulate domestic demand.

Officials say they are now tightening the procedure for disclosure of provincial-level GDP data to make it consistent with national-level data and avoid embarrassing discrepancies.

Going forward, quarterly GDP data must first be reported to the NBS, and can be published only after central review, says Ye Qing. In addition, NBS officials are looking to put in place better accounting systems and statistical standards at the provincial level.