Statistics matter. They determine, for instance, how a nation distributes resources and plans for the future. They also inform those on the outside what is happening inside a country.
The Chinese Communist Party (CCP) has long had a statistics problem—the numbers from different sources inside China don’t always add up. The Party has sought to address this with a newly revised Statistics Law, which was signed by Hu Jintao on June 27 and will take effect in 2010.
As China has come to play an increasingly important role in the world economy, the statistical data released by the regime have been subjected to more and more scrutiny in the past several years. Especially since the Chinese economy started to slow down in 2008. Both domestic and international scholars have been questioning several key economic figures released by the CCP’s National Bureau of Statistics (NBS) and other state offices.
For example, the International Energy Agency (IEA) recently pointed out an unexplainable inconsistency between China’s declining oil and electricity consumption and the reported growth of 6.1 percent in its first quarter GDP. The contradiction in the numbers casts doubt on the fast paced recovery the regime has claimed for China’s economy.
Both the NBS officials’ prompt rebuttal and a quick freeze by China's Association of Electricity Generators on publishing consumption data only served to intensify the discussion on how trustworthy China’s statistical data are.
Inconsistent statistics and conflicting data regarding other key economic figures, such as the unemployment rate, average income, and number of house sales, have again and again put the CCP regime in a similar embarrassing position in the past several months. All of these highlighted for the regime the urgent need to revise the 26-year-old Statistics Law.
Consistency, Accuracy, and Propaganda
Facing an increasingly complex economy, the members of the CCP regime have mixed feelings about statistics. On the one hand, the CCP central authorities wish they could have a set of trustworthy statistics, which would give them better control over China. On the other hand, they want to keep using statistics, along with the state-run media, to provide a rosy picture of China’s development, spurring domestic consumption and luring international investment.
Unfortunately, in many cases these two functions of statistics conflict with each other. Different statistical datasets were released by different governmental branches for different purposes. Some datasets put more emphasis on statistics’ first function as social activity indicators, while the others put more emphasis on statistics’ second function as propaganda tools. This discrepancy has given external economists the chance to highlight the inconsistencies between the datasets released by the CCP regime.
To address this issue, the revised Statistics Law carefully specifies the roles of the central and local statistical branches, as well as the relationship between local authorities and the local statistical branches. The revised legislation emphasizes that the statistical tasks should be clearly divided between statistical branches at different levels, and prohibited multiple statistical branches to “overlap” in their work, which has historically been the primary source of conflicting statistical results.
The new legislation lso stressed that the local authorities should provide the primary data to its statistical branches, while the statistical branch should promptly provide the statistical results to the local authorities for review and approval. This close collaboration between the local authorities and their statistical branches will significantly reduce another source of inconsistent statistical results. In fact, during the review of the new legislation, an item in the draft explicitly stated that the local authorities could not release any statistical data that conflict with the data released by their statistical branches. Although this item was removed from the final version, the spirit of that item was maintained in the final law.
Poisonous Culture
If this law is strictly implemented in China in the future, we can foresee that the CCP will dramatically reduce the scenarios where conflicting data are released by different sources, and will thus improve the consistency among the published data. That will save the regime from constantly addressing embarrassing questions regarding the credibility of its data and statistics. This law, however, could also make assessing the true situation in China even harder, because whether the consistent statistical data released by the CCP will reflect China’s reality is a totally different story.
The complicated review and approval procedures specified by this new legislation will reassure us that the future data will be more politically correct. Meanwhile, its sincere tone in cracking-down on the practice of falsifying raw data suggests that the central authorities are at least as desperate as the scholars outside the system regarding obtaining the real data from local authorities and companies.
But a sincere tone and a real need may not be enough. In a system where independent monitoring by the media is prohibited, and where officials are promoted according to their self-reported data via a top-down decision mechanism, tampering with data has become such a daily routine at different levels of the local authorities, as well as in both public and private companies, that such tampering has become part of a poisonous culture in China.
An experienced accountant in China said that almost all the companies who interviewed her asked her technical questions explicitly testing how well she could seamlessly falsify the account records to fool an official inspection. Even the regime publicly admits that 68 percent of the large, state-owned corporations have serious accounting errors. Nobody has bothered to find out what the corresponding percentages are among the small private companies.
With this quality of data as the inputs for China’s statistical system, a measure of cynicism is justified regarding the efforts through this new legislation to ensure consistency in statistical reporting. The first law taught in statistics is “garbage in, garbage out.”
