As the Chinese economy continues to sputter, prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of the troubles.
Record stacks of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. However, local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said.
Electricity production and consumption are considered a telltale sign of a wide variety of economic activity and thus are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country’s economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries. Indeed, officials in some cities and provinces are also overstating economic output, corporate revenue, corporate profits and tax receipts, the corporate executives and economists said. The officials do so by urging businesses to keep separate sets of books, showing improving business results and tax payments that do not exist.
The executives and economists roughly estimated that the effect of the inaccurate statistics could be inflating a variety of economic indicators by 1 or 2 percentage points.
The National Bureau of Statistics, the Chinese government agency that compiles most of the country’s economic statistics, denied that economic data had been overstated.
“This is not rooted in evidence,” an agency spokeswoman said. Some still express confidence in the official statistics. Mark Mobius, executive chairman of Templeton Emerging Markets Group, cited the reported electricity figures when he expressed skepticism that the Chinese economy had real difficulties. “I don’t think the economic activity is that bad — just look at the electricity production,” he said.
An economist with ties to the government agency said, however, that officials had begun making inquiries about the authenticity of some data after detecting signs that numbers for electricity demand may have been overstated.
Questions about the quality and accuracy of Chinese economic data are longstanding, but the concerns now being raised are unusual. This year is the first time since 1989 that a sharp economic slowdown has coincided with the country’s once-in-a-decade leadership changeover.
Officials at all levels of government, from provincial party secretaries to county administrators, are under enormous pressure to report good economic results to Beijing as they wait for promotions, demotions and transfers to cascade down from the capital. That has meant that some measures of economic activity are being falsified, according to the executives and economists.
A top corporate executive in China with access to electricity grid data from two energy-hungry provinces in east-central China, Shandong and Jiangsu, said electricity consumption in both provinces had dropped more than 10 percent in May from a year earlier.
Another executive said that electricity consumption had also fallen in parts of western China. At the same time, the economist with ties to the statistical agency said cities and provinces across the country had reported flat or only slightly rising electricity consumption.