Chinese Official Reveals Thousands of Companies Fabricated Business Data

By Frank Fang
Frank Fang
Frank Fang
Frank Fang is a Taiwan-based journalist. He covers U.S., China, and Taiwan news. He holds a master's degree in materials science from Tsinghua University in Taiwan.
June 24, 2018Updated: June 25, 2018

The Chinese economy has grown rapidly over the past decade, but in recent years, revelations about how the Chinese regime has exaggerated data suggest that the health of China’s economy has been overstated.

On June 20, a Chinese official revealed that thousands of Chinese companies have submitted fraudulent performance figures. Sometimes, the Chinese authorities were the ones driving these companies to inflate their figures, according to Wang Dongming, deputy head of the standing committee of National People’s Congress (NPC), China’s rubber-stamp legislature.

While speaking at an NPC work meeting, Wang reported that since 2017, 1,195 firms have fabricated the business data they reported to the authorities. In total, 2,051 companies had reported abnormal business data.

Companies in three areas, Binhai, a district in the northern city of Tianjin; Kailu County in northern China’s Inner Mongolia; and Xifeng County in northeastern China’s Liaoning Province, were found to have inflated their data by an average of 56, 10, and 6.7 times, respectively, according to Wang.

He added that some companies were motivated to report inflated figures because it could help them get better loans or avoid paying certain taxes.

Local authorities were blamed for encouraging the misreporting of data. Wang said some local governments set up earning targets for local companies, and when companies couldn’t reach the targets, officials manipulated data by asking businesses to report fake figures, or in some cases, forged the data themselves.

Additionally, in order to keep up the appearance of “steady” economic growth, some local authorities reported increasingly inflated economic figures for their region year after year.

This is not the first time that a top Chinese Communist Party (CCP) official has spoken openly about inflated economic data. In March 2015, Dong Dasheng, the former deputy auditor at China’s National Audit Office, openly questioned China’s official GDP figures in 2014, which was 7.4 percent growth rate.

In December 2015, Chinese state media Xinhua reported that officials inflated data such as fiscal revenue, household income, and GDP figures in China’s northeastern provinces of Liaoning, Jilin, and Heilongjiang. For example, in Heilongjiang, which borders Russia, local officials overstated investment figures by at least 20 percent.

In January, officials in Baotou, the second largest city in northern China’s Inner Mongolia, admitted to making “fake” additions to their fiscal revenue. The revised numbers were reduced by 50 percent, according to Reuters.

Fraudulent economic data could be the result of dealings in the real estate industry, which has boomed behind China’s economic growth over the years. According to a December 2017 report by Reuters, mortgage fraud remained a hidden danger in China, potentially speeding up the collapse of the housing market.

On June 21, Chinese financial newspaper National Business Daily reported that nine major state-run banks violated rules when providing loans totaling about 36 billion yuan (about 5.5 billion) to companies in the real estate industry. Additionally, three of the banks inflated their saving deposits by a total of 4.5 billion yuan (about 693 million).