In a previous blog, I referred to the practice in China of falsifying employment statistics of college graduates.  This phenomenon has been described “a verb in its passive voice.”  In this context, although a graduate actually is not employed, she could be reported as such by the university or college from which she graduated.  In this way, she is made to be employed by the university.

Early in August, when China’s National Bureau of Statistics (NBS) released the gross domestic product (GDP) statistics for the first half of 2009, a discrepancy of 9.9 percent was found between the national GDP and the sum of GDPs reported by the provinces.

The NBS attributed this to three causes – the double counting of goods and services produced in more than one province; different accounting methods used by the central and local government; and the fact that GDP figures are the most important yardstick in the performance evaluation of local government officials, who therefore most likely inflated local GDP statistics.

All these point to a bigger problem in China’s statistical system.  There is no doubt that China has made tremendous progress in overhauling the system.  In fact, as early as 1984, China enacted the National Statistics Law, which was revised in 1996 and 2009.  The law explicitly requires that organizations and individuals under statistical investigation “provide truthful statistical data.”

Further, the law stipulates that altering statistical data without authorization, fabricating statistical data, or compelling or prompting statistics institutions or statisticians to tamper with or fabricate statistical data are violations subject to criticism and administrative sanctions, or even crimes bearing legal consequences.

At least on paper, this law should make it more unlikely that those who collect and compile data would actually falsify statistics under the pressure from the central, local, or ministerial governments for political purpose – one of the common Western criticisms of the official Chinese statistics.

Changing statistical reports requires not only direction from the central leadership and the cooperation from statistical bureaus or other agencies responsible for the data collection and reporting, but also the sophistication to prevail in the scrutiny of the international community.

Nevertheless, it should be recognized that a two-track statistical system still causes problems in data collection and reporting.  On the one hand, local statistics bureaus remain guided by the NBS professionally.  They are responsible for collecting data and reporting them to the NBS and fulfilling their tasks as required by the Statistics Law.

On the other hand, their budgets mainly come from local governments, which tend to carry more weight in appointing and promoting staff members.  When a conflict between these two roles creates an awkward situation, local statistics personnel are more likely to disregard their professional ethics in order to satisfy and even pander to the local leadership.  This explains why there have been numerous and current instances of exaggeration or underreporting regarding key statistics.

Interestingly, if the statistical data distortions during the Great Leap Forward, from 1958 to 1961, served a distinctly political purpose, the distortions in the recent years more or less reflect the specific interests of both local leaders and local statistics personnel.  For example, university presidents have pumped up employment statistics of their graduates to demonstrate that they are not causing social instability.

In 2005, in its diagnosis of China’s various governance problems, the Organization for Economic Cooperation and Development (OECD) singled out anomalies in statistics reporting.  Indeed, the quality of Chinese economic statistics, in particular the growth rate of real GDP and other data, has been repeatedly challenged inside and outside China.

“Questions about data quality inevitably lead to questions about the institutional organization of China’s statistical authority and the methods of statistical data compilation in China,” the OECD observes.

The problematic Chinese statistics has embarrassed statistical professionals and the NBS, China’s statistical authority.  But it also is possible that they have misled the central leadership, weakening their ability to make sound decisions based on the real situation of the Chinese economy and social development.  Therefore, it is in the interests of the Chinese government to fix the statistical system so as to make it reliable and trustworthy.