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An examination of China's historical practice of issuing statistics conveys the degree of overconfidence that such data depicts. In 1956, Premier Chou Enlai informed the world that China had achieved food self-sufficiency. A year later, 1 million Chinese died of hunger in a great famine.
In a boast to the world in 1963, Chairman Mao Zedong said that the country was producing 100 million tons of steel every year. A few years later, when he found that pig iron produced in homemade blast furnaces was of the lowest grade and worth a heap of scrap, they were abandoned.
Recent boasts of high industrial achievement have concealed the fact that acid rain caused by the burning of low-grade, high-sulfur coal has destroyed 20 percent of China's cultivable land, lakes and forests, resulting in declining food production and increasing imports.
The FDI statistics have been the most interesting of the lot. In recent consecutive years the country has claimed impressive figures of US$60 to $70 billion. However, if one were to examine these numbers a bit further, one would discover that 60 percent of these figures represent not new money but profits returned on investments from Hong Kong, Macao and Taiwan. Due to muddled definitions of tax incentives, these have been treated as FDI. The bigger the FDI amounts, the greater is the prestige they bring to Chinese leaders.
These are but a few of the big discrepancies in China's published economic data.
The above examples reveal the great Chinese game of number crunching and the advantage it brings to the country's world image. It is true that since 1980, when U.S. money and technology started pouring in, China has made great economic strides. Poverty levels declined, gross national product quadrupled and exports zoomed to US$700 - $900 billion. However, this has not brought any added advantage to the Chinese masses, especially when one factors in the 62 percent of total GNP exported. On the contrary, this has left very little for domestic consumption.
The truth about the high living standards projected in Western media is that they apply to some 350 million people living along China's eastern seaboard, up to 150 miles inland from the coast. That is what visitors and business travelers see and admire. Great stories are told to Western audiences about Shanghai's Maglev trains, sprawling high-rises and attractive shopping centers, comparable to the best in the West.
However, in March, 2006, the Economist of London reported the state of 900 million Chinese living in poverty away from its prosperous eastern coastline. A U.S. television crew filming in China's interior showed to Western audiences pictures of poverty, inadequate drinking water and the impact of acid rain. That China may not welcome these reporters again is as much a reality as the truth behind their exaggerated economic statistics.
The mandarins in Beijing are masters at manipulating statistics. Every political commissar in a village or district wishes to outshine his neighbor to produce fancy statistics of productivity and prosperity. He rounds them up so that they look better. This trend continues at the city, provincial and state level and by the time it is published, the data far exceeds the originally rounded figures. Wu Zong and Florence Chan, respectively editor and contributor of "Asia Times," have independently confirmed these trends in their review of China's economic performance. Together, these damning revelations and independent reports from economists in China have confirmed the truth about China's inflated statistics.
Stories of China's exports and trade have painted the country as an economic miracle of modern times. Are they true? Definitely not. For one thing, fake exports are generated by enterprises to get government rebates. This tends to inflate the statistics, and will continue until the political mandarins in Beijing stop basking in their self-delusional success and face the truth.
A few years ago, when doubts were expressed about China's GDP calculations, Thomas G. Rowski sounded alarm bells at China's Economic Review Symposium in December, 2001. He firmly believed that China's GDP growth was about half the published figure. He used statistical methods to prove that the production and consumption numbers did not match. His methodology in arriving at such conclusions may be debatable, though he had no other means of confirming his theories.
How statistics are produced is a state secret, and hence may give the Chinese some joy and advantage in what they want to project. Stating that their economy in 2006-07 is valued at US$2.5 trillion may be incorrect, as the recalculated value, after making adjustments for various overestimates, puts the revised figure at US$1.6 - $1.7 trillion. The International Monetary Fund went further to say that, in 2004, China was ranked seventh in the world for GDP growth as opposed to the second or third position that China claimed.
Why does China consistently lie about its economic statistics? Perhaps Chinese diplomats and political leaders simply love doing it and being feted for their achievements. They do deserve credit. Despite being a communist state, they have managed to attract cash and investments from the West. Unlike some other Asian nations, they are diligently attempting to reduce poverty and acting as a well-disciplined nation. At least manipulative politicians and self-serving bureaucrats are not holding up economic progress.
We do wish China well. We admire its progress and believe that it should be a model for others to follow. However, Chinese leaders must control their number crunching habit so that their statistics will serve them well in the future.
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(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)
