In the midst of the 20th National Congress of the Chinese Communist Party (CCP), China postponed the release of its third-quarter GDP report. Other key economic data such as those for retail sales, industrial production, imports and exports, and real-estate investment were also withheld without a release date being rescheduled.
China, the world’s second-largest economy and once a global economic powerhouse, has in recent years exhibited an economic slowdown at a pace much faster than many economists predicted.
The annual growth of its GDP has fallen from a peak of 14 percent in 2007 to a projected 3.3 percent this year, a report released last month by the Asian Development Bank said.
Concerns are growing that China’s staggering economy could drag down the global recovery from the COVID-19 pandemic.
At a time when global economic well-being is going to be negatively impacted by these downward pressures from China, the world is eagerly looking for signs of stabilization and improvement of China’s economy. Beijing’s unexpected withholding of key economic data, understandably, fueled speculation.
One view says the fact that the CCP’s National Congress puts everything including the pre-scheduled economic data release on hold indicates a shift from China’s decades-old economic development-centered mode back to its politics-dominant hardline mode.
This view is worthy of attention, as China has never been too far away from its old-fashioned economic model dictated by politics, even during its freest era in the 1980s and 1990s.
China’s ruthless implementation of its “zero COVID” policy in the past two-and-a-half years, at the expenses of the country’s economic viability, is the strongest evidence supporting this conviction.
Another view, shared by a majority of outside observers and analysts, is that China’s third quarter economic data are too ugly, their release would distract public attention from the CCP’s big event, which is to set the direction and priorities for the nation for the next five years and beyond.
Given the ripple effects of the US-China trade war on China — as well as the increase in EU-China tensions, the efflux of manufacturing linked to the global supply chain from China, the paralysis of companies and industries due to sensitive technologies being cut off by the West, etc — China’s current economic downturn is inevitable.
China’s inflexible, and often seriously flawed, political and economic structures only help exacerbate the deterioration. Its over-reliance on real-estate investment and its rigid pandemic policy are only two of the countless by-products of China’s economic and political malfunction.
Therefore, this second explanation of China’s delay in data release is also laudable and likely to be correct.
However, both analyses missed the most critical element when assessing China’s economic behavior: data validity, be it scheduled or delayed.
The outside world has been suspicious of China’s official economic data for two major reasons: The year-end annual tallies always nicely meet the growth targets set at the beginning of the year, and there is little fluctuation in inflation-adjusted quarter-to-quarter GDP growth.
However, due to a lack of transparency in data collection and processing, as well as a lack of integrity of data available to the outside world, these doubts had never been confirmed by the outside world until one dramatic event a few years ago.
The credibility burden became so obvious that the sum of reported provincial economic outputs embarrassingly exceeded the national GDP for years.
Then-Chinese National Bureau of Statistics director Ning Jizhe (寧吉?) finally had to publish a statement in early 2016 in the CCP’s mouthpiece, the People’s Daily, to condemn the problem of economic data falsification.
“Currently, some local statistics are falsified, and fraud and deception happen from time to time, in violation of statistics laws and regulations,” Ning said in the article, blaming local governments for data manipulation.
Yet China’s plague of economic data falsification was there long before this official acknowledgment. The data were so unreliable that even Chinese Premier Li Keqiang (李克強) opted to use alternative parameters in the so-called “Li Keqiang index,” which has tracked rail cargo, energy consumption and financial lending, to gauge China’s real economic activities since as early as 2007, when Li, then-governor of Liaoning Province, openly dismissed China’s official GDP numbers as “man-made.”
Although no criticism of China’s economic data has ever spoken louder than the premier’s refusal to use them, the outside world has often failed to pick up on this and continues to take the numbers at face value.
So exactly how much has China’s economic data been falsified or inflated? Again, the answer is hard, if not impossible, for the outside world to find out without China’s help, which is extremely unlikely.
Following the 2016 condemnation of data falsification, several provinces publicly acknowledged past errors in economic data reporting.
In January 2017, then-Liaoning Province governor Chen Qiufa (?求發) said that 23 percent of its reported 2016 economic output was fabricated.
In January 2018, Inner Mongolia’s district party committee stated that its 2016 industrial added value would be readjusted downward by 40 percent.
Also in January 2018, Tianjin, one of China’s four most important cities, said that the 2016 economic output of its Binhai New District would be slashed by nearly one-third.
If the above revelations reflect the true extent of data falsification, they imply that the three regions managed to inflate their respective economic output by 25 percent to 30 percent in 2016.
The catch is, if the above three were the only ones to falsify their economic data, their fraudulence would only have minimum impact on China’s national GDP.
However, the likelihood is that a majority, if not all, of China’s 32 mainland provinces and equivalents were, and maybe still are, engaging in data falsification.
Brookings Institution research in 2019 estimated that China’s “GDP growth from 2008-2016 is 1.7 percentage points lower,” or about 12 percent smaller than official figures, in agreement with the above assessment that China’s economic data falsification is not sporadic, but a widespread and persistent plague.
China has become increasingly tight-lipped about its economic data, and stopped publishing crucial raw measurements. This makes it almost impossible to assess the true state of China’s economic activities.
Whether China withholds its third quarter GDP and other economic data during the party congress does not matter much. China knows that its data are fraudulent. It also knows that the outside world is eager to scrutinize the data. A delay in the release of data would arouse curiosity and disarm the waiting world’s suspicion.
The Chinese government is a master of manipulation in all domestic matters. It certainly is capable of applying the same protocol to a world that is eager to see a stabilizing economy in China. The party’s congress is just as a convenient tool to make this waiting even more unbearable.
Once the delayed data finally surface, everybody would be relieved and have no desire to question their authenticity.
This might be the true motivation behind China withholding its economic data.
Daniel Jia is founder of the consulting firm DJ LLC Integral Services in Spain.
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