The economic data Beijing has been putting out suggests a grand revival. While it is true that China is among the world’s fastest growing economies, real inflation figures impacting the common man, remain camouflaged
China has been consistently registering a high yet stable economic growth since the late eighties. Such higher consistent economic growth has often resulted in academic debates and has been even doubted. It is argued that the Chinese economic growth is based on favourable demographics, market reforms and other economic parameters. But the economists have many times been casual about the accuracy of the economic statistics, for it part of an authoritarian form of governance.
The question, therefore, is posed: Whether the Government of the day is willing and is technically equipped enough to provide accurate statisticsIJ Since China is progressing rapidly towards becoming the largest economy of the world, and is suffering from economic imbalances, the answer to these questions is more crucial than ever.
China’s recent economic fragility has restored the questions of quality economic data. Various schools of thought were of the opinion that the official statistics on the one hand overstated the economic growth and understated the inflation on the other. Inflation remains a main constituent of national output measurement, since it affects the real GDP. Yet even while calculating inflation, National Bureau of Statistics of China does not incisively disclose the manner in which inflation is calculated.
China uses a combination of deflators to translate nominal GDP to real GDP. Several indices (or combinations thereof) can be used to arrive at the deflator (for instance, the consumer price index, producer price index, retail price index, etc.). But the NBS does not publish how it arrives at the deflator each year.
By contrast, other countries are transparent about how they compile this data, since it is such a vital signal for investors to gauge inflation. The NBS does not even publish a deflator for its GDP reports. World Bank senior economist louis Kuijs has criticised the Chinese Government’s refusal to release details on how much weighing it gives to different product categories while calculating inflation.
One of the reasons this matters is that there is an unusually large gap between China’s food inflation and general inflation; in other words, low official inflation can mask the price hikes felt by the consumers.
The capturing and presentation of several data sets in Chinese economy is indicative of problems. The statistical assignment in China is exceptionally decentralised, and concepts, quality and the methods suffer from a lack of uniformity in the vast economy of China. Other deficiencies are more specific. Measures of consumption rely too heavily on retail sales, while overlooking other forms of consumption.
Many of the right laws are now on the books to guarantee accurate reporting of investment, but there is a lack of information to distinguish real investments from those that only exist on paper. Figures on official inflation are even more perplexing. The Chinese Government continues to be secretive about the weights it uses to calculate this important measure.
The consumer price index, which forms the basis of inflation measures, does not adequately factor in the role of the Chinese service sector and private industry. In addition, China’s statistics undergo large and frequent revisions even after they are made public, further calling the Government methodology into question.
Yet another sign of unreliability lies in the statistics themselves. The provenance of another source of measuring national output like electricity production and automotive sales acts as a pivotal parameter for inters- block consistencies. Several cross national organisations, engaged in the studies of Chinese economic growth have established that official statistics have camouflaged the volatility and also the growth rate, of national output since the financial crisis in 2009.
The inconsistencies among official statistics do not stop here. Different measures of national output — the production and expenditure methods — are contradictory as well. These incongruities raise the likelihood of inaccurate statistics.
If improved data indicates, say, a higher share of consumption in GDP, or faster GDP growth, that is conducive to the Chinese Government’s message. The NBS itself is pioneering many of these studies. On the other hand, accurate statistics can also shed light on sensitive problems, like vast income gaps. The Government’s attempts to conceal the poor quality of air in China’s largest cities, and the subsequent loss of public confidence in the Government’s credibility, illustrate the pitfalls of official mendacity.
However, the debate must move beyond a simple dichotomy between ‘reliable’ and ‘unreliable’. material that the country puts out. The quality of China’s data should be considered across units and over time. Where there is a problem, we need to better identify whether it is owing to certain technical failures or otherwise.
(The views expressed here are personal)