Sunday, March 28, 2010

China not massaging growth statistics: World Bank

Many journalists, researchers and investors who cover China have long believed that the government massages the GDP figures.

But Gao Xu, a World Bank economist in Beijing, is among the growing number of experts who insist that this is not the case.

In a recent posting on the World Bank's East Asia blog, he argues that China's economy is so large and the data-gathering process so broad, that it would be impossible to cook the books without leaving a trace.

Any attempt to manipulate data—say, flattering the GDP number a little bit—requires concerted efforts of various government departments as well as private sector institutions. If there are some participants in the circle not doing this kind of massage to their own data, inconsistency arises, leaving footprints of manipulators in statistics.

China's V-shaped recovery last year aroused widespread suspicions that the Communist Party bean counters had been fiddling the figures to ensure growth above the politically important level of 7 percent, below which the country is not creating enough jobs to accommodate the expansion in its workforce. China grew by 8.7 percent in the end, rebounding strongly after a sluggish first quarter.

But Gao plots the government GDP figures alongside other economic indicators (VAT revenue, electricity production and value added to industry) and shows that the uptick in GDP in the second half of last year is corroborated by the other data.

His conclusion:

As a consumer of a wide range of Chinese statistics, I carry out exercises like what is shown above fairly frequently. I personally haven’t found any significant inconsistency in Chinese data over the last decade. It makes me believe that data manipulation is not a big problem in China in recent years. Indeed, this is the consensus in the academic field as most researchers on this topic agree that there is little sign that China is manipulating its economic data.

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