There have long been concerns about the reliability of published macroeconomic data for China. About 3 months ago, the U.S. - China Economic and Security Review Commission published a timely report, titled, "The Reliability of China's Economic Data - An Analysis of National Output". The report certainly makes interesting reading.
In a post earlier today I warned about the importance of data quality. When the data relate to an economy that's size and importance as that of China, then it's time to sit up and take notice!
If you're someone who uses Chinese macro-data, then there are some things that you might want to think about. It's definitely a case of caveat emptor. Here are a few quotes form the report in question:
- "China’s statistical work has improved markedly since the 1980s. Nonetheless, there is substantial evidence that China’s national output figures continue to be less reliable than in the United States and Europe. External and internal consistency checks reveal irregularities."
- "There is evidence of political manipulation [of the data] at the local level, and to some degree, also in the central government."
- "National aggregate GDP should be equal to the sum of GDP of each province in China. However, there is a serious discrepancy between nominal GDP at the provincial and national level."
- "Different measures of national output – the production measure based on the value-added of industry and the expenditure measure based on consumption and investment should add up to roughly the same number, in terms of growth and absolute value. Even in the United States, there is a slight discrepancy between these figures; yet the divergence should be around two percent at most. The difference between the two figures in China, in nominal terms, exceeds the accepted threshold. Expenditure GDP is consistently larger in absolute terms, while production-side GDP has shown faster growth in most years."
- "One indication that China’s consumer price indices are dubious is the fact they do not always correlate well with the implicit GDP deflator, which is based on the producer price index."
"The reliability of China’s statistics is also a crucial challenge for the world economy. China remains a very open economy heavy reliant on both exports and imports. It is also the primary destination of foreign direct investment worldwide. Countless firms, not to mention their shareholders and creditors, depend heavily on accurate statistics to make decisions."
© 2013, David E. Giles