8 ms·

Chinese local governments rush to admit fake data

coldcode 9y ago
Eventually faking economic data has real consequences since economics inevitably happens anyway. At some point you just look like an idiot.
- deleted 9y ago
  [deleted]
- anthonyleecook 9y ago
  Exactly! Actually this should be more of a big deal. This is a MASSIVE accounting fraud, the kind that brought down Enron in 2000
chris_t 9y ago
The unreliability of those figures will be no surprise to anyone who follows China's economy or politics closely, and I hope this bodes for better quality statistics in the future. There's a small industry of people who try to measure Chinese growth in other ways that are harder to forge such as railway shipment tonnage and energy consumption; it'll be interesting to see to what extent those methods are vindicated if/when better quality data becomes available.
- seanmcdirmid 9y ago
  That is known as the Li Keqiang Index. As you might know Li is the current premier, but he has been made pretty powerless by Xi.
- anthonyleecook 9y ago
  If we assume 20-30% of gdp claim from most of the provinces in China are fake, then that reduces their overall GDP from 11.2T to probably around 9-10T, only about double Japan's 5T, and about half of US's 19T and way less than EU's 17T. Nowhere near taking over US/EU anytime soon, and probably falling into a lost decade for China. And with the 3% gdp growth from US recently, US economy is looking very bright.
- fspeech 9y ago
  Chinese GDP is not a sum of locally reported GDPs. Locally reported GDPs have always exceeded the total GDP, sometimes by a large margin. Now they may lag. A large motivation is how the taxes collected are shared between the central government and the local governments. A new tax sharing scheme introduced last year makes underreporting of the local GDPs profitable for the local governments, meaning they get to remit less taxes to the central government.
  - chris_t 9y ago
    Oh, that makes sense. I'd hoped the trend was towards a higher level of reliability but perhaps it's just a change of direction in the manipulation.
    - fspeech 9y ago
      If you look at large companies' accounts, they typically have inter segment reconciliations. Where intra-company trades are booked can be artificial. In the Chinese case, the city of Tianjin, e.g., which has a financial district, booked revenues from companies registered there but conducting no substantial business there in its own local GDP. This is akin to the state of Delaware including in its own GDP report (if there is such a thing) all companies registered there. But this inflation has no effect on the national GDP, which is aggregated over the businesses directly, so it does not matter how many provinces claim the businesses as their own. Hope this helps put things in context a little bit for you.
- yndoendo 9y ago
  Easter and Western politics, socialize, communism, capitalism, share the same means to an end, political parties trying to retain power and often have nothing to do with the people.
enraged_camel 9y ago
Should we continue to trust the Chinese government when they report improvements in other areas such as green energy and clean air? How can we know those numbers aren’t doctored like these ones were?
- dovdovdov 9y ago
  “I only believe in statistics that I doctored myself” ― Winston S. Churchill
  - imron 9y ago
    "Don't believe everything you read on the Internet" -- Abraham Lincoln
- mikeash 9y ago
  At least clean air in cities can be verified just by being there.
- deleted 9y ago
  [deleted]
  - mazerackham 9y ago
    Wow...
- ithinkinstereo 9y ago
  Well, the Chinese are strongly incentivized to actually fix those issues, so while they may lie in the near-term, I do believe they're _actually_ committed to addressing these problems. Outside of economic stagnation, environmental disasters are the no. 1 perceived threat today to rule & order by the CCP.
- anthonyleecook 9y ago
  actually you are correct; local governments in China have been known to fake air data https://medium.com/@shanghaiist/officials-use-mist-cannon-to-fake-air-quality-data-end-up-freezing-building-31f2404e2b70 https://medium.com/@shanghaiist/officials-use-mist-cannon-to... and this year, Shanghai's air pollution has been worse than Beijing. Some say due to the cold air pushing the pollution down this year. https://unearthed.greenpeace.org/2018/02/12/shanghai-air-pollution-worse-beijing/ https://unearthed.greenpeace.org/2018/02/12/shanghai-air-pol...
cscurmudgeon 9y ago
This is what happens when you trust but don't verify on a global scale.
joelb2014 9y ago
I'll be interested to see if this leads to a massive shakeup in local politics from Beijing. I can't imagine they're pleased with the amount of doctored data (unless they already knew and were using it to appear stronger on a global scale)
- nerbert 9y ago
  When I read the title, I immediately imagined China faking growth at a global scale and maximizing its importance. It's not the case at all: Of the 31 provinces, direct-controlled municipalities and autonomous regions in China, three have already admitted falsifying certain economic data. Starting with the northeastern province of Liaoning in January 2017, the Inner Mongolia Autonomous Region and the city of Tianjin have said their statistics were wrong. Of the three, only Tianjing has admitted doctoring the overall provincial gross domestic product figures. Liaoning and Inner Mongolia had padded something else: their fiscal revenues.
  - joelb2014 9y ago
    I had thought the same but I'm still wondering if it was a proxy to cover something else (ex. ability to pay debt obligations) that would have had ramifications in the global market
- fspeech 9y ago
  These numbers came out after shakeups. New local leaders (like company boards after an accounting scandal) want to get their base numbers low -- making their own GDP goals a lot easier to achieve.
- ksec 9y ago
  Of course they knew about it. It is just when one province do it, others have to do it too. There aren't any Top party members who hasn't been a head of region at least once when they were ranking up the ladder. So not only did they knew, they properly have done it themselves. Now Xi is trying fix what's wrong. ( Only if you are not reading too much into it )
gourou 9y ago
More details about their economic data https://www.nytimes.com/2018/01/18/business/china-gdp-economy-growth.html https://www.nytimes.com/2018/01/18/business/china-gdp-econom...
imron 9y ago
Government bureaucrats were promoted based on GDP and tax revenue, and I for one am shocked, shocked, that this led to inflated GDP and tax revenue figures!
jensv 9y ago
Thank goodness we have a good honest man in President Trump!
Bucephalus355 9y ago
China has a long history of doing this. During Mao’s reign, agriculture numbers were padded constantly. They were only padded by a few percent at each level, but as each reporting hierarchy added its own padding, eventually you got massive overestimates. This is why 50 million people died in the famine under Map, more than the Holocaust and “gulag archipelago” combined. I don’t think people realize just how bad it was, it was a time of absolutely insanity and deprivation. 40% of all building structures were torn down between between 1958-1963 if that gives you any idea of how detached from reality society under Mao was. Also, China is lying about their pollution numbers, and just simply moving the factories farther west. Western China is one of the most rural parts of the world and its very hard to measure / prove who is using what / polluting what. No matter what the US does regarding global warming, it’s very likely any gains will be “eaten” by a growing, data faking, Chinese government.
- DontGiveTwoFlux 9y ago
  Citations needed.
  - talloaktrees 9y ago
    https://en.m.wikipedia.org/wiki/Great_Leap_Forward https://en.m.wikipedia.org/wiki/Great_Leap_Forward
    - icebraining 9y ago
      Where in that article is it said that the padding of agriculture numbers and subsequent massive overestimates were the cause of the 50M deaths?
      - oregondan 9y ago
        It's in the section on Famine [1]. Main article [2]. > Although actual harvests were reduced, local officials, under tremendous pressure from central authorities to report record harvests in response to the innovations, competed with each other to announce increasingly exaggerated results. These were used as a basis for determining the amount of grain to be taken by the State to supply the towns and cities, and to export. This left barely enough for the peasants, and in some areas, starvation set in. A 1959 drought and flooding from the Yellow River in the same year also contributed to famine. > During 1958–1960 China continued to be a substantial net exporter of grain, despite the widespread famine experienced in the countryside, as Mao sought to maintain face and convince the outside world of the success of his plans. [1] https://en.wikipedia.org/wiki/Great_Leap_Forward#Famine https://en.wikipedia.org/wiki/Great_Leap_Forward#Famine [2] https://en.wikipedia.org/wiki/Great_Chinese_Famine https://en.wikipedia.org/wiki/Great_Chinese_Famine
anthonyleecook 9y ago
"In Liaoning Province tax receipts and income from various fees were padded by 20-30% according to counties and cities during the period of 2011-2014. Inner Mongolia has said that 25% of the fiscal revenue stated for 2016 were actually fake." That actually validates some of the slowdown that I saw while I was in China. Business felt slow, and it seems that there wasn't the fast feel anymore compared to 2007. Very little small company activities, and alot of economic activities seem to involve state-owned companies (and we all know how slow they are). If we assume 20-30% fake data across most of its local provinces the last couple of years, this would probably place China's GDP growth at around 1% a year (maybe even negative), way below 7% consistently claimed by the government. However, the 1% would be consistent with the drop in exports in recent year.
- ksec 9y ago
  I just wanted to add, my view is while they are not moving as fast as say 2007 or 2010. They are still fast. Certain places may not be growing as quick, but other places like West China and Mid China are moving at super fast pace. ( That is where all the government money at the moment )
- vfulco 9y ago
  Gut feel, last year was negative growth from all the complaining of my foreigner friends (midlevel and higher execs) in SH
tootie 9y ago
If this works, then it's a great move by Xi. Pay down that fake data debt in a controlled way instead of waiting for an implosion.
dbuder 9y ago
Hedge funds and ibanks look electricity usage numbers bc everything is fake. Everyone giggles when non major figures come out from China exactly on target, again.
jensv 9y ago
实践是检验真理的唯一标准，自冷战结束以来，世界上只有中国在经济规模上，缩小了和美国的差距。 Practice is the only criterion for the test of truth, and since the end of the cold war, only china has been able to narrow the gap between the United States and the United States
- anthonyleecook 9y ago
  China's advantages to a booming economy in the early 2000s are all withering away, however. Demographics: China is actually projected to have less than 800M population by 2100. Foreign direct investment: leaving to higher growth areas like India and Vietnam, partly also due to capital controls. Cheap labor: wage inflation is causing manufacturing to move out of China. Large labor force: China will have one of the oldest population by 2050, with working forces retiring. Tech growth: surveillance, great firewall, pollution, economy slowdown will spur talents to leave China.
- jacquesm 9y ago
  According to GT that reads: "Practice is the sole criterion for testing truth. Since the end of the Cold War, only China has narrowed its gap with the United States in terms of economic scale."
thisisit 9y ago
And what happens if people are actually faking (lying) about reporting fake data? If these government official were lying, giving them incentives to admit they are lying is the worst outcome I can think of.
arisAlexis 9y ago
that's why there is a solid case for government blockchain usage

Eventually faking economic data has real consequences since economics inevitably happens anyway. At some point you just look like an idiot.

deleted 9y ago
[deleted]
anthonyleecook 9y ago
Exactly! Actually this should be more of a big deal. This is a MASSIVE accounting fraud, the kind that brought down Enron in 2000

chris_t 9y ago

The unreliability of those figures will be no surprise to anyone who follows China's economy or politics closely, and I hope this bodes for better quality statistics in the future. There's a small industry of people who try to measure Chinese growth in other ways that are harder to forge such as railway shipment tonnage and energy consumption; it'll be interesting to see to what extent those methods are vindicated if/when better quality data becomes available.

seanmcdirmid 9y ago
That is known as the Li Keqiang Index. As you might know Li is the current premier, but he has been made pretty powerless by Xi.
anthonyleecook 9y ago
If we assume 20-30% of gdp claim from most of the provinces in China are fake, then that reduces their overall GDP from 11.2T to probably around 9-10T, only about double Japan's 5T, and about half of US's 19T and way less than EU's 17T. Nowhere near taking over US/EU anytime soon, and probably falling into a lost decade for China. And with the 3% gdp growth from US recently, US economy is looking very bright.
fspeech 9y ago
Chinese GDP is not a sum of locally reported GDPs. Locally reported GDPs have always exceeded the total GDP, sometimes by a large margin. Now they may lag. A large motivation is how the taxes collected are shared between the central government and the local governments. A new tax sharing scheme introduced last year makes underreporting of the local GDPs profitable for the local governments, meaning they get to remit less taxes to the central government.
- chris_t 9y ago
  Oh, that makes sense. I'd hoped the trend was towards a higher level of reliability but perhaps it's just a change of direction in the manipulation.
  - fspeech 9y ago
    If you look at large companies' accounts, they typically have inter segment reconciliations. Where intra-company trades are booked can be artificial. In the Chinese case, the city of Tianjin, e.g., which has a financial district, booked revenues from companies registered there but conducting no substantial business there in its own local GDP. This is akin to the state of Delaware including in its own GDP report (if there is such a thing) all companies registered there. But this inflation has no effect on the national GDP, which is aggregated over the businesses directly, so it does not matter how many provinces claim the businesses as their own. Hope this helps put things in context a little bit for you.
yndoendo 9y ago
Easter and Western politics, socialize, communism, capitalism, share the same means to an end, political parties trying to retain power and often have nothing to do with the people.

enraged_camel 9y ago

Should we continue to trust the Chinese government when they report improvements in other areas such as green energy and clean air? How can we know those numbers aren’t doctored like these ones were?

dovdovdov 9y ago
“I only believe in statistics that I doctored myself” ― Winston S. Churchill
- imron 9y ago
  "Don't believe everything you read on the Internet" -- Abraham Lincoln
mikeash 9y ago
At least clean air in cities can be verified just by being there.
deleted 9y ago
[deleted]
- mazerackham 9y ago
  Wow...
ithinkinstereo 9y ago
Well, the Chinese are strongly incentivized to actually fix those issues, so while they may lie in the near-term, I do believe they're _actually_ committed to addressing these problems. Outside of economic stagnation, environmental disasters are the no. 1 perceived threat today to rule & order by the CCP.
anthonyleecook 9y ago
actually you are correct; local governments in China have been known to fake air data https://medium.com/@shanghaiist/officials-use-mist-cannon-to-fake-air-quality-data-end-up-freezing-building-31f2404e2b70 https://medium.com/@shanghaiist/officials-use-mist-cannon-to... and this year, Shanghai's air pollution has been worse than Beijing. Some say due to the cold air pushing the pollution down this year. https://unearthed.greenpeace.org/2018/02/12/shanghai-air-pollution-worse-beijing/ https://unearthed.greenpeace.org/2018/02/12/shanghai-air-pol...

cscurmudgeon 9y ago

This is what happens when you trust but don't verify on a global scale.

joelb2014 9y ago

I'll be interested to see if this leads to a massive shakeup in local politics from Beijing. I can't imagine they're pleased with the amount of doctored data (unless they already knew and were using it to appear stronger on a global scale)

nerbert 9y ago
When I read the title, I immediately imagined China faking growth at a global scale and maximizing its importance. It's not the case at all: Of the 31 provinces, direct-controlled municipalities and autonomous regions in China, three have already admitted falsifying certain economic data. Starting with the northeastern province of Liaoning in January 2017, the Inner Mongolia Autonomous Region and the city of Tianjin have said their statistics were wrong. Of the three, only Tianjing has admitted doctoring the overall provincial gross domestic product figures. Liaoning and Inner Mongolia had padded something else: their fiscal revenues.
- joelb2014 9y ago
  I had thought the same but I'm still wondering if it was a proxy to cover something else (ex. ability to pay debt obligations) that would have had ramifications in the global market
fspeech 9y ago
These numbers came out after shakeups. New local leaders (like company boards after an accounting scandal) want to get their base numbers low -- making their own GDP goals a lot easier to achieve.
ksec 9y ago
Of course they knew about it. It is just when one province do it, others have to do it too. There aren't any Top party members who hasn't been a head of region at least once when they were ranking up the ladder. So not only did they knew, they properly have done it themselves. Now Xi is trying fix what's wrong. ( Only if you are not reading too much into it )

gourou 9y ago

More details about their economic data https://www.nytimes.com/2018/01/18/business/china-gdp-economy-growth.html https://www.nytimes.com/2018/01/18/business/china-gdp-econom...

imron 9y ago

Government bureaucrats were promoted based on GDP and tax revenue, and I for one am shocked, shocked, that this led to inflated GDP and tax revenue figures!

jensv 9y ago

Thank goodness we have a good honest man in President Trump!

Bucephalus355 9y ago

China has a long history of doing this. During Mao’s reign, agriculture numbers were padded constantly. They were only padded by a few percent at each level, but as each reporting hierarchy added its own padding, eventually you got massive overestimates. This is why 50 million people died in the famine under Map, more than the Holocaust and “gulag archipelago” combined. I don’t think people realize just how bad it was, it was a time of absolutely insanity and deprivation. 40% of all building structures were torn down between between 1958-1963 if that gives you any idea of how detached from reality society under Mao was. Also, China is lying about their pollution numbers, and just simply moving the factories farther west. Western China is one of the most rural parts of the world and its very hard to measure / prove who is using what / polluting what. No matter what the US does regarding global warming, it’s very likely any gains will be “eaten” by a growing, data faking, Chinese government.

DontGiveTwoFlux 9y ago
Citations needed.
- talloaktrees 9y ago
  https://en.m.wikipedia.org/wiki/Great_Leap_Forward https://en.m.wikipedia.org/wiki/Great_Leap_Forward
  - icebraining 9y ago
    Where in that article is it said that the padding of agriculture numbers and subsequent massive overestimates were the cause of the 50M deaths?
    - oregondan 9y ago
      It's in the section on Famine [1]. Main article [2]. > Although actual harvests were reduced, local officials, under tremendous pressure from central authorities to report record harvests in response to the innovations, competed with each other to announce increasingly exaggerated results. These were used as a basis for determining the amount of grain to be taken by the State to supply the towns and cities, and to export. This left barely enough for the peasants, and in some areas, starvation set in. A 1959 drought and flooding from the Yellow River in the same year also contributed to famine. > During 1958–1960 China continued to be a substantial net exporter of grain, despite the widespread famine experienced in the countryside, as Mao sought to maintain face and convince the outside world of the success of his plans. [1] https://en.wikipedia.org/wiki/Great_Leap_Forward#Famine https://en.wikipedia.org/wiki/Great_Leap_Forward#Famine [2] https://en.wikipedia.org/wiki/Great_Chinese_Famine https://en.wikipedia.org/wiki/Great_Chinese_Famine

anthonyleecook 9y ago

"In Liaoning Province tax receipts and income from various fees were padded by 20-30% according to counties and cities during the period of 2011-2014. Inner Mongolia has said that 25% of the fiscal revenue stated for 2016 were actually fake." That actually validates some of the slowdown that I saw while I was in China. Business felt slow, and it seems that there wasn't the fast feel anymore compared to 2007. Very little small company activities, and alot of economic activities seem to involve state-owned companies (and we all know how slow they are). If we assume 20-30% fake data across most of its local provinces the last couple of years, this would probably place China's GDP growth at around 1% a year (maybe even negative), way below 7% consistently claimed by the government. However, the 1% would be consistent with the drop in exports in recent year.

ksec 9y ago
I just wanted to add, my view is while they are not moving as fast as say 2007 or 2010. They are still fast. Certain places may not be growing as quick, but other places like West China and Mid China are moving at super fast pace. ( That is where all the government money at the moment )
vfulco 9y ago
Gut feel, last year was negative growth from all the complaining of my foreigner friends (midlevel and higher execs) in SH

tootie 9y ago

If this works, then it's a great move by Xi. Pay down that fake data debt in a controlled way instead of waiting for an implosion.

dbuder 9y ago

Hedge funds and ibanks look electricity usage numbers bc everything is fake. Everyone giggles when non major figures come out from China exactly on target, again.

jensv 9y ago

实践是检验真理的唯一标准，自冷战结束以来，世界上只有中国在经济规模上，缩小了和美国的差距。 Practice is the only criterion for the test of truth, and since the end of the cold war, only china has been able to narrow the gap between the United States and the United States

anthonyleecook 9y ago
China's advantages to a booming economy in the early 2000s are all withering away, however. Demographics: China is actually projected to have less than 800M population by 2100. Foreign direct investment: leaving to higher growth areas like India and Vietnam, partly also due to capital controls. Cheap labor: wage inflation is causing manufacturing to move out of China. Large labor force: China will have one of the oldest population by 2050, with working forces retiring. Tech growth: surveillance, great firewall, pollution, economy slowdown will spur talents to leave China.
jacquesm 9y ago
According to GT that reads: "Practice is the sole criterion for testing truth. Since the end of the Cold War, only China has narrowed its gap with the United States in terms of economic scale."

thisisit 9y ago

And what happens if people are actually faking (lying) about reporting fake data? If these government official were lying, giving them incentives to admit they are lying is the worst outcome I can think of.

arisAlexis 9y ago

that's why there is a solid case for government blockchain usage