Monday, December 6, 2010

Via Wikileaks: China's GDP Numbers Totally Unreliable

The latest discovery from the WikiLeaks data dump is that a top Chinese official knows the Chinese economic data is bogus. There's no real surprise here in the sense that anyone watching China should know the numbers are very edgy. Just last Friday in The EPJ Daily Alert, I wrote:
China's real estate market appears to be on the edge of breaking down. It is very difficult to get reliable numbers out of China, so it is often best just to look at the anecdotal evidence.
But what is interesting is who in China understands the bogus nature of the numbers and the sophisticated manner he uses to get a true sense for growth in China.  From The Telegraph (My emphasis):
Li Keqiang,...the 55-year-old [who] is widely tipped to become China's next prime minister and is currently the country's executive vice premier, with responsibility for macro-economic management, in private talks with the US ambassador in 2007, when he was still just the head of the Chinese province of Liaoning...cast doubt on China's much-vaunted economic statistics.

A diplomatic cable leaked by Wikileaks, the whistle-blowing website, reveals that Mr Li described China's gross domestic product figure as "man-made" and "therefore unreliable".

Chinese officials have repeatedly been found to have artificially inflated their local GDP figures in order to win face and hit their targets.

On several occasions, the sum of all of China's local GDP tallies added up to more than the national statistic. In 2009, for example, the National Bureau of Statistics said first half GDP had grown by 7.1pc to 13.99 trillion yuan (£1.37 trillion), only to find that the sum of local GDP readouts was 10pc higher.

Mr Li said he used three ways of evaluating Liaoning's economic activity, focusing on electricity consumption, the volume of rail cargo and the amount of bank loans disbursed.

"By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth," the cable said. "All other figures, especially GDP statistics, are 'for reference only,' he said smiling," it added.

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