It’s become a cliché to read Chinese economic statistics with scepticism. Every China-watcher and businessperson knows that the country’s data collection methods are dubious at best, but the difficulty always lay in proving the suspicions.
No longer. At the end of April, the website of China’s Central Commission of Discipline Inspection (CCDI), one of the tools of President Xi Jinping’s anti-corruption campaign, announced that 313 National Bureau of Statistics (NBS) employees had been found guilty of providing data for financial gain.
The NBS bureaucrats allegedly took money for providing internal information in violation of agency rules. The watchdog has demanded the funds – totalling almost $US500,000 – be returned, and other arrests may still be forthcoming.
The easy criticism would be to add this news to the pile of similar information labelled “China’s impending doom.” Admittedly, that pile is creeping ever-higher with fewer people now reciting the maxim that China is on track to overtake the US economy on most economic measures in the next five, ten or twenty years. That scenario is unlikely, to say the least.
Yet there are other, arguably more important, lessons from the CCDI’s uncovering of systemic data corruption, not to mention the actual corruption too. Earlier in April, the NBS released its updated figures for China’s GDP in the first quarter. Leaving aside the fact that the first quarter has barely ended, so knowing what the actual GDP figures are is questionable, it registered 6.7%. This is an envious figure for any economy, but still one of China’s lowest in over a decade.
The first quarter also registered record credit expansion in China, ballooning to 7.5 trillion yuan, up 58% year on year and equivalent to 46.5% of nominal GDP. The Financial Times framed this expansion as “one of the highest ratios ever.” Credit growth accelerated to 15.8% year on year to end of March, which was also the fastest increase in 20 months.
The hand-wringing at the beginning of the year over China’s tumbling stock market is another piece of the puzzle. To average Chinese workers and citizens, slipping GDP figures and the health of its stock market barely register on their consciousness. Both the credit expansion and the first quarter’s suspicious GDP point to the true audience for such data: foreign investors and governments. Who this display of data is meant for is revealed to have a clear answer – if you’re seeing it, it’s for you.
Measuring an economy or populace is not a strictly Western idea. Many government structures, including traditional Chinese governments have gathered data on civilian subjects for millennia. Both the Western and Chinese civilisations found ways to use this knowledge to both better understand its people and plan for inevitable power swings. As far as tools of the state go, official statistics can be incredibly powerful.
For this article’s purposes, GDP figures isn’t a Chinese idea, it is a Western idea. This might sound trite, but it is a fundamental world dynamic. Much like the rest of the modern Chinese economic system, the fundamentals of doing business are all adopted from the American and British machinery of economic stewardship. Even its political structure, communism, is a western idea.
This is not uncommon across the world. Every nation state considered part of the “international community” governs with some form of the Western politico-economic model. Countries not embracing enough of this model are considered “rogue states” – think North Korea, Iran or the suppressed Somaliland. Proto-states such as Kurdistan are considered “emerging” precisely because they agree to adopt the basic forms of the Western politico-economic model.
China took this exact step with vigour during the middle of the 20th century following the end of WWII, although by that time it was already well on the path to integration with the international community. The victors, and liberators, of China were the Allies led by the US and the Soviet Union. In the years since, China has experimented with models of communism and capitalism.
This explains why ordinary, low-level Chinese bureaucrats – not just the elites – prefer to manipulate economic data rather than report the truth. It is the way they have been trained to act. Gathering data, collating it and reporting the results is all part of a business game they did not invent. It is a process introduced to the Chinese system, and for that reason the Chinese government is simply playing by Western rules.
Do not misunderstand this, China is not being manipulated. It has learned the tricks of displaying exactly what the creators of the politico-economic model expect to see. China is not yet strong enough to develop its own models, and it is not clear that it wants to either. All indications are that what China really wants is to incorporate into the existing system, not overtake or replace it.
Consider how Chinese businesspeople attend meetings with foreign counterparts dressed in Western suits, not traditional Chinese clothing. A society hoping to usurp, display ambivalence or even replace the status quo make very different sartorial decisions. Beijing is aware its growth rate has slowed, or perhaps stopped, but it also knows that stats are all that matter for foreign eyes. And if those are healthy, it can buy breathing room to make those lies into the truth.
Yet a deeper criticism than this is that the answer to the question of what China’s GDP figure really is, can only be: no one knows. If China can’t gather all data, and the data it does collect is now clearly unreliable, what exactly are financial analysts expected to think about its economy?
Whether China’s economic miracle is at an end is no longer academic: the struggle can be seen in the NBS arrests. In the monumental task of restructuring the economy to deal with these changes, China might count itself lucky it has a trailblazing Western economic model of consumerism to mirror. After all, it has so committed itself to the fundamentals of that system it can hardly back out now.