BOFIT Viikkokatsaus / BOFIT Weekly 2017/24

The Communist Party's corruption-fighting arm, the Central Commission for Discipline Inspection, announced that some officials in the Jilin and Inner Mongolia provinces have been charged with faking the data of local governments and businesses. No further details about the incidents have yet been released. A major fraud that had gone on for several years was uncovered in January in the Liaoning province. China's National Statistics Bureau subsequently revised down Liaoning province's GDP estimate by over 20 %. The economic growth figures reported by several other provinces, mostly located in the northern parts of China, have also raised suspicions.

Perverse incentives are the main driving factor for local authorities to distort their data. Regional officials can become obsessed with hitting established growth targets as their career trajectories depend on reporting consistently good economic performances. Changes in the incentive system has long been discussed, but in practice no significant changes to the system have been made.

Reporting incorrect statistical data is especially problematic for China's decision-makers, because it creates a risk that economic policy will be based on inaccurate information. The task of correcting the long-recognised problems with provincial and local figures has fallen upon the central National Bureau of Statistics, which uses its own surveys and samplings to improve the accuracy of national figures. For example, the aggregate of GDP growth figures reported by regions typically indicate much higher growth than the official national figure for GDP growth. The Liaoning incident was so extensive, however, that it casts doubt on whether the NBS's measures to correct the figures go far enough.