Essay: Do China tamper with their National Statistics?

Bloomberg recently published an article in which Ning Jizhe, head of the Chinese National Bureau of Statistics, vehemently denied any tampering with statistics. He stated, “We have a zero tolerance of any manipulation of statistics.” Clearly, appearing to be ethical in the eyes of the international community is important to the Chinese government and its statistics office. Despite Jizhe’s attempts to relieve any doubts about the statistics office’s credibility, the Chinese government and its statistics office have continued to engage in practices that naturally raise questions of its ethicality. In order for a statistics office to gain credibility, it must be politically independent from other branches of government, both on a professional and an institutional level. In addition, the methodologies used to gather and analyze data should be in-line with international best practices. In the case of China’s national statistics office, its methodologies used, particularly in the calculation of GDP, is different than most countries’ methods of calculation, and the office is entangled with political influence.
Mixing politics with statistics is unethical because important decisions are made based on the results of statistical findings. As a result, transparency and international trust are crucial in maintaining an effective statistics office. If a statistics office appears to be under the influence of a government or other external body, the users of the statistics may conclude that the numbers have been tampered with to appease a third party. For this reason, the statistics office must not comment on policy and its efficacy. To do so would undermine proper statistical principles and reinforce the idea that the numbers may be falsified. China’s statistics office retains close ties with the government and frequently comments on public policy, which in part harms its credibility. The line that separates the government from the national statistics office in China is blurry at best. The Head of the NBS, Ning Jizhe, is also Vice Chairman of the National Development and Reform Commission, a macroeconomic planning agency in China. Clearly, it is in Jizhe’s personal favor to display positive-looking economic figures. As a result, professional independence and institutional independence cannot exist because the head of the office has inherent biases and clear-cut political ties. To complicate matters further, the statistics office spends little effort attempting to appear to be independent in the eyes of the public. In an interview in August, Ning Jizhe fielded questions about the effects of China building infrastructure across Asia and concerns that it would create a debt trap for host countries. In response, Jizhe claimed that no such debt trap would be created and that the initiative will improve people’s lives and boost economic development. As someone who is supposed to be objective and purely focus on the numbers, Jizhe’s commentary on policy is worrisome for investors and other users of statistics that rely on the information that the statistics office produces. Political commentary by the head of the statistics office inherently raises doubts over the validity of the numbers. In an October press release of the national GDP figures, the National Bureau of Statistics of China praised the leadership of China’s executive branch, commented on ongoing policy, and recommended certain political action that would promote economic growth. By praising the leadership with words such as “strong leadership”, China’s statistics office immediately places itself under suspicion and undermines its credibility. An office that praises leadership appears to be under the influence of politicians. Furthermore, commenting on current policy is not the job of a statistician. In the press release it stated, “[The economy] maintained a steady and sound performance… the economic structure was optimized, the development quality and efficiency was improved…” A statistics office’s job is to focus on gathering, analyzing, and disseminating statistics. At no point should the statistics office attempt to interpret the numbers. Lastly, the press release provided political commentary stating, “we should implement the requirement of high-quality development, continue to deepen the reforms and opening-up, prioritize weak areas as the key task… and focus on the stability in areas like employment, financial sector, etc…” Again, the statistics office should not recommend policy. Otherwise it risks appearing like it has its own political agenda or is cooperating with the political agenda of the current leadership.
In addition to its political press releases, the National Statistics Bureau of China also presents questionable results in its calculation of GDP (The Reliability of China’s Economic Data: An Analysis of National Output). Combined with a lack of transparency by the statistics office in its calculation of the figures, the numbers have raised many eyebrows. At the beginning of the year, China’s statistics office revealed that GDP grew 6.9 percent in 2017, up from 6.7 percent the year prior. If one were to look at a graph of China’s GDP growth over the last five or six years, one would find a smooth line that shows very little volatility. Rarely in statistics does one find almost zero volatility. Part of the issue of that contributes to China’s controversial figures is that local officials sometimes misreport numbers to the central government due to pressures to meet a certain national target. For example, the inner Mongolia region admitted that two-fifths of the industrial production for 2016 did not exist. Last year, Tianjin briefly posted on its website that previous data had been inflated, but the post was quickly deleted. To Beijing’s credit, Ning Jizhe has recognized the discrepancy in the provincial and national data and has committed to narrowing the gap. If mistakes have been acknowledged, it is crucial that the statistics office work to publish revised historical numbers with detailed explanations of the changes to more accurately reflect the true growth of China’s economy. Not only is this the most ethical decision to make, but it is also an act of goodwill toward users of statistics and a decision that would improve the statistics office’s credibility. Although China’s statistics office releases revisions often, they are large and without explanation. Despite Jizhe’s vow to improve the credibility of the office, a lack of transparency remains at the heart of China’s statistics office’s issues. A common issue with China’s statistics office is that the figures reported at the end of each month are revised at the end of the year and contains substantial changes. Earlier this year, China reported that industrial profits were up 16 percent, but if one were to add the month-by-month changes, the result would be an 8 percent decline. To solve this, China simply stated the result was due to different samples and excluded firms below a certain size. The statistics office also stated that financing fell by 13 percent, which falls in line with Beijing’s goal of deleveraging, but industries that are credit-intensive like housing are experiencing increases in sales and values. There have been numerous other examples of discrepancies between the reported data and the manually calculated results. As a rule of thumb, data points should be correlated with its indicators. These examples of questionable numbers are bound to raise questions about the methods by which China compiles its data. It is possible that the disparities in reported and manually calculated results are valid, but greater transparency needs to exist if China’s statistics office wishes to be viewed as credible by the international community.
Furthermore, many critics have taken issue with China’s method of calculating GDP. Most advanced countries calculate GDP based on expenditures, but China calculates GDP based on value added by industry. In other words, China calculates GDP based on production, such as net output of agriculture, industry, and services. One can imagine that basing GDP off of production can provided inaccurate numbers because it does not actually reflect consumption. China has attempted to alleviate these issues by releasing expenditure numbers on a yearly basis, but the statistics office does not publish inflation adjusted numbers, nor do they provide an information on quarterly expenditure. Therefore, investors and economists are forced to calculate their own estimates. Critics cite China’s timing and revision of statistical data to support the argument that China’s numbers are inaccurate. China is typically one of the first countries to report data after the end of each quarter. Other advanced countries take at least a month to efficiently gather data. Any form of premature release of data is a valid reason to debate the reliability of the figures.