Fri, Mar 29, 2002 - Page 12 News List

China's false statistics will kill it

By Chiu Li-li 邱莉莉

Gordon Chang (章家敦), author of the book The Coming Collapse of China, recently paid a visit. Chang's book comes highly recommended by book reviews in Time magazine, BusinessWeek and the Japanese newspaper Yomiuri Shimbun, among others.

In it, Chang observes some important aspects of China's economy, including its all-pervasive corruption, its state-owned enterprises, the varying ideologies which underpin it, and the finance and banking sectors. It is a good book that shatters many myths about China and serves as a timely warning to Taiwanese proponents of the "go west" dictum.

China's economy has grown rapidly over the past ten years or so, attracting massive foreign capital as it has done so. Statistics released by China's communist government, however, have recently met with skepticism from all corners. Xiong Zhengnan, director of policy and regulations at China's National Bureau of Statistics, told the London-based Financial Times that a survey conducted between May and October last year uncovered at least 60,000 violations of laws governing the reporting of statistics in China.

A Chinese report in 1999 also showed that 89 percent of state-owned enterprises fabricated their incomes and expenditures.

Albert Keidel, who worked in the World Bank's Beijing office in the 1990s, has written in a private report to the China Economic Quarterly that China's official economic figures exaggerate actual growth. The situation was especially serious in the late 1990s.

Underlings cheat their superiors, who in turn cheat outsiders. This is an old disease of communist regimes. In 1958, the "Great Helmsman" Mao Zedong (毛澤東) promised that China would overtake the UK and the US within 15 years. What was the result? Even after tens of millions of farmers died in the Great Leap Forward, Mao still believed the spurious crop harvest reports.

Today, the fabrications have spread to economic growth figures. Thomas Rawski, a professor of economics at the University of Pittsburgh, has presented statistical evidence from the China Statistical Yearbook implying that China's GDP grew by 24 percent between 1997 and 2000. Energy consumption, however, declined by 12.8 percent over the same period. Job opportunities created during this time, as well as rises in commodity prices, were either moderate or negative. The views of the optimists simply don't stand up to analysis against the mass of negative statistics.

Unemployment in China's farming villages is now as high as 160 million, with another estimated 20 million expected to lose their jobs in the wake of China's entry into the WTO. China plans to dole out 290 billion yuan over the next four years to write off bad loans owed by bankrupt companies. Meanwhile, the withdrawal of some state-owned enterprises from the market will present the problem of resettling more than 5.7 million workers. Corruption has also been an obstacle to trade. Chinese courts last year handled 21,800 cases of corruption and bribery. Economic losses caused by corruption amounted to almost 15 percent of China's GDP between 1999 and 2001. And economic loss is only the tip of the iceberg of problems caused by corruption.

In his book, Chang blames dogma for the slow speed of China's reforms. The Communist Party's mission is to rule the people. Democracy and freedom are anathema to it. But democratic systems and guarantees of private property rights are important factors in a country's economic stability. The Asian Wall Street Journal once used the fable of the tortoise and the hare to describe China and India, the world's two most populous nations. It said that Chinese officials were free to drive farmers off the farm or suppress labor unions in order to attract foreign investment. Such methods appear conducive to short-term economic development. China's communist government, however, has not provided concrete guarantees for the property rights and freedom of its citizens, the article said, and may therefore turn out to be no match for democratic India.

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