Local governments inflated China’s GDP by $900 billion last year

[Hellraiser007]

Local governments inflated China’s GDP by $900 billion last year

Chinese president Xi Jinping recently said that the government would stop tying promotions of local government officials to GDP performance alone. This is important because local leaders under pressure to produce high economic output are much more prone to spending wastefully and in ways that harm the environment.

Although this was hailed as a big breakthrough when Xi made the pronouncement, the last government made similar promises. Here’s a look at how effective those were:

Local governments reported a combined $9.4 trillion in economic output in 2012—11.1% higher than the central government’s final GDP calculation. And their noses have only gotten longer in recent years. Back in 2009, local government GDP inflation was only 8.0% higher than the $5.5 trillion the central government reported.

This isn’t just bureaucratic farce (though it is that too). Layers of inflated economic growth from the local level could be understating how sharp China’s slowdown actually is. National Business Daily reports that when the National Bureau of Statistics began doing spot-checks on industrial companies in Zhongshan, a city in Guangdong, it found that the local government reported a combined 85 billion yuan in output for 71 of its companies, just a bit higher than the 2.2 billion yuan they actually generated (link in Chinese). It’s hard to believe the central government statisticians would be able to filter out such an extreme degree of exaggeration when totting up their own GDP calculations. Distortions like that could be misleading central government economic planners, and as the recent interbank loan spikes hinted, that can lead to big policy missteps.

All things considered, though, inflating data is probably the least harmful outcomes of the Chinese Communist Party’s emphasis on GDP performance. In fact, it’s a lot better than relying on credit to stimulate the economy.

Unfortunately, just because Xi hints it’s safe for local officials to come clean about lousy economic output doesn’t mean they will—or that they’ll cut back on their credit habit.

Many poorer provinces don’t have a lot of options at their disposal. Particularly in the central provinces, foreign investment and domestic consumption simply aren’t enough to buoy growth (link in Chinese). As a provincial deputy governor told NBD about the need for local government to keep investing, “The central government sets the target at 7-8%, and since we’re not a province with a strong economy, our target has to exceed 10%. And with the not-so-great economic situation, surpassing that target is now more urgent.”

Even if the central government catches all that fibbing, it’s counting the credit-bingeing. That’s a good thing to keep in mind on July 15, when China announces its Q2 GDP.

 

[Hellraiser007]

Apart form inflating the growth numbers , faking stats, the local authorities spend most of their funds in infra development(which may not yield the profits) and show it as a real growth. These fake stats when combined at the central level they make a huge difference in real GDP estimates.

 

[beijingwalker]

Those we had travelled to both China and India and seen the two countries with their own eyes would certainly know which one is a big liar and an inflated balloon by the west.

 

[Ganges Zephyr]

Those we had travelled to both China and India and seen the two countries with their own eyes would certainly know which one is a big liar and an inflated balloon by the west.

Dear Senior Member, read the topic again followed by article and THEN COMMENT. Its not about India

 

[Rajaraja Chola]

Those we had travelled to both China and India and seen the two countries with their own eyes would certainly know which one is a big liar and an inflated balloon by the west.

Are u really an idiot or acting like one?
Do u even read the article? Do u know that there is not a single word of India in that article.

Do u know, that ur POliticians troll you, more than you guys troll in ur own country related threads ...

 

[navtrek]

Local governments inflated China’s GDP by $900 billion last year

Chinese president Xi Jinping recently said that the government would stop tying promotions of local government officials to GDP performance alone. This is important because local leaders under pressure to produce high economic output are much more prone to spending wastefully and in ways that harm the environment.

Although this was hailed as a big breakthrough when Xi made the pronouncement, the last government made similar promises. Here’s a look at how effective those were:

Local governments reported a combined $9.4 trillion in economic output in 2012—11.1% higher than the central government’s final GDP calculation. And their noses have only gotten longer in recent years. Back in 2009, local government GDP inflation was only 8.0% higher than the $5.5 trillion the central government reported.

This isn’t just bureaucratic farce (though it is that too). Layers of inflated economic growth from the local level could be understating how sharp China’s slowdown actually is. National Business Daily reports that when the National Bureau of Statistics began doing spot-checks on industrial companies in Zhongshan, a city in Guangdong, it found that the local government reported a combined 85 billion yuan in output for 71 of its companies, just a bit higher than the 2.2 billion yuan they actually generated (link in Chinese). It’s hard to believe the central government statisticians would be able to filter out such an extreme degree of exaggeration when totting up their own GDP calculations. Distortions like that could be misleading central government economic planners, and as the recent interbank loan spikes hinted, that can lead to big policy missteps.

All things considered, though, inflating data is probably the least harmful outcomes of the Chinese Communist Party’s emphasis on GDP performance. In fact, it’s a lot better than relying on credit to stimulate the economy.

Unfortunately, just because Xi hints it’s safe for local officials to come clean about lousy economic output doesn’t mean they will—or that they’ll cut back on their credit habit.

Many poorer provinces don’t have a lot of options at their disposal. Particularly in the central provinces, foreign investment and domestic consumption simply aren’t enough to buoy growth (link in Chinese). As a provincial deputy governor told NBD about the need for local government to keep investing, “The central government sets the target at 7-8%, and since we’re not a province with a strong economy, our target has to exceed 10%. And with the not-so-great economic situation, surpassing that target is now more urgent.”

Even if the central government catches all that fibbing, it’s counting the credit-bingeing. That’s a good thing to keep in mind on July 15, when China announces its Q2 GDP.

Unwanted post we should first look at ourselves. Even if the Chinese have done as above its their problem.

 

[StarCraft_ZT]

Local governments inflated China’s GDP by $900 billion last year

Chinese president Xi Jinping recently said that the government would stop tying promotions of local government officials to GDP performance alone. This is important because local leaders under pressure to produce high economic output are much more prone to spending wastefully and in ways that harm the environment.

Although this was hailed as a big breakthrough when Xi made the pronouncement, the last government made similar promises. Here’s a look at how effective those were:

Local governments reported a combined $9.4 trillion in economic output in 2012—11.1% higher than the central government’s final GDP calculation. And their noses have only gotten longer in recent years. Back in 2009, local government GDP inflation was only 8.0% higher than the $5.5 trillion the central government reported.

This isn’t just bureaucratic farce (though it is that too). Layers of inflated economic growth from the local level could be understating how sharp China’s slowdown actually is. National Business Daily reports that when the National Bureau of Statistics began doing spot-checks on industrial companies in Zhongshan, a city in Guangdong, it found that the local government reported a combined 85 billion yuan in output for 71 of its companies, just a bit higher than the 2.2 billion yuan they actually generated (link in Chinese). It’s hard to believe the central government statisticians would be able to filter out such an extreme degree of exaggeration when totting up their own GDP calculations. Distortions like that could be misleading central government economic planners, and as the recent interbank loan spikes hinted, that can lead to big policy missteps.

All things considered, though, inflating data is probably the least harmful outcomes of the Chinese Communist Party’s emphasis on GDP performance. In fact, it’s a lot better than relying on credit to stimulate the economy.

Unfortunately, just because Xi hints it’s safe for local officials to come clean about lousy economic output doesn’t mean they will—or that they’ll cut back on their credit habit.

Many poorer provinces don’t have a lot of options at their disposal. Particularly in the central provinces, foreign investment and domestic consumption simply aren’t enough to buoy growth (link in Chinese). As a provincial deputy governor told NBD about the need for local government to keep investing, “The central government sets the target at 7-8%, and since we’re not a province with a strong economy, our target has to exceed 10%. And with the not-so-great economic situation, surpassing that target is now more urgent.”

Even if the central government catches all that fibbing, it’s counting the credit-bingeing. That’s a good thing to keep in mind on July 15, when China announces its Q2 GDP.

Correct, what the article says is what our PM Li Keqiang concerns. Our state council has prompted activation of currency in circulation, improved currency effiency and thus controlled inflation. Also China Central Bank has suspended Reverse-repurchase Agreement to achieve liquidity shrinkage.

 

[Hellraiser007]

Unwanted post we should first look at ourselves. Even if the Chinese have done as above its their problem.

If you feel so, then do not comment in this thread.

 

[Guynextdoor2]

@Hellraiser007 -I hate you man. Your threads ruin my day, keeps telling me that MORE is bad with the world economy and I need not expect great bonuses this year (again!) Why don't you let us wallow in blissful ignorance till october- is that too much to ask?

 

[Hellraiser007]

@Hellraiser007 -I hate you man. Your threads ruin my day, keeps telling me that MORE is bad with the world economy and I need not expect great bonuses this year (again!) Why don't you let us wallow in blissful ignorance till october- is that too much to ask?

Chill myfriend .....


I have mentioned in one of my post that India is isolated from Chinese crisis. India economy is performing well compared to last year.

So no worries. This is all about china not entire world or India.

Asian markets are doing well and Singapore and Japan registered good growth levels.

 

[t_for_talli]

Those we had travelled to both China and India and seen the two countries with their own eyes would certainly know which one is a big liar and an inflated balloon by the west.

Who is saying India is better

The point here is the China is not what it seems by going through the numbers published by the Government

 

[Götterdämmerung]

Is it just me? I didn't know that provincial government stats have become official stats of the central government.

 

[beijingwalker]

Chinese economy perform better than most countries in this world,so ,no worries,US and Japan perfromed the worst.China is well on path to overtake US.

 

[beijingwalker]

CNN:Are China's economic statistics accurate?
Are China's economic statistics accurate?
By Charles Riley March 26, 2013: 6:57 AM ET

Pose this question to a group a China watchers and you're likely to receive a variety of responses. Some observers are convinced that China is cooking its books. Others believe state statistics are largely reliable and useful for drawing conclusions about the world's second largest economy. Still others will debate the accuracy of certain data classes, pointing to more meaningful alternatives.

Now we have an opinion from researchers at the Federal Reserve Bank of San Francisco. Their verdict? The statistics are pretty good.

The researchers compared Chinese government statistics with other economic measures that the researchers say are "less susceptible to official manipulation."

"Importantly, these models suggest that Chinese growth has been in the ballpark of what official data have reported. We find no evidence that recently reported Chinese GDP figures are less reliable than usual."

This brief paper from the San Francisco Fed won't settle the matter. But mark another tally in the "legit" category.

The paper, written by John Fernald, Israel Malkin and Mark Spiegel, can be read here.

Of course, it's worth noting that China is not the only country to have its official statistics questioned. Just last year, former General Electric (GE) CEO Jack Welch suggested on Twitter that the Obama administration, calling them "these Chicago guys," had manipulated the monthly jobs report for September in order to make the economy look better than it actually was just weeks before the election.

Welch then doubled down, writing in the Wall Street Journal that data collected by the Bureau of Labor Statistics might not be "precise" or "bias-free." He raised questions over three key statistics -- the labor-force participation rate, the growth in government workers and overall job growth -- saying big one-month gains "have to raise some eyebrows."

http://economy.money.cnn.com/2013/03/26/china-statistics/

 

[BigDaddyWatch]

Useless story and useless thread. The official figures for China doesn't come from the local governments but its comes from the central government. So nothing has changed. According to the latest World Bank numbers China's economy in nominal exchange rate is still 8,227 trillion dollars and that of India is 1,842 trillion dollars for 2012. Meaning that China's economy is still nearly 4,5 times larger then that of India's. And you take into account that the Indian rupee has weakened nearly 10% against the USD this year while the Chinese Yuan gained 1,7% against the USD. On top of that China has a consistent current account surplus while India has a constant current account deficit. China's economy is expected to grow around 7% this year while that of India's is only going to grow around 5%. And you take into account that India's population is growing at twice the rate of that of China's you get the picture.

GDP (current US$) | Data | Table