Inflated statistics wreak havoc on economies of Northeast China

Source:Global Times Published: 2015-12-14 18:58:01

The practice of inflating official economic statistics has been rampant in China's three northeastern provinces. Local officials have been reflecting on the reasons for the practice, accessing the damage done to the local economies, and thinking about ways to correct their wrongdoings. The three provinces ranked near the bottom of the country's GDP ranking for the first three quarters of 2015.

Photo: CFP

Many officials in China's three northeastern provinces - Heilongjiang, Jilin and Liaoning- confided to reporters with the Xinhua News Agency that localities have been squeezing the "bubbles" in their economic statistics and reflecting on the damage done by these phony numbers.

The inflated statistics are a mixed result of the repetitive accounting, a lack of unified sources and incomplete basic information, according to a report on on Thursday, citing experts.

The deeper reason comes down to the fact that local officials can get promoted for good-looking statistics under the gross domestic product (GDP)-centric officials promoting and appraisal systems in China. At the same time, the officials are the ones who produce the figures.

Inflated information

In the three northeastern provinces, the problem is even worse, according to the Xinhua report, which said the meddling with figures has hindered both the central and local economic planning.

"Falsified statistics undercut the economy's sustainability," Zhao Zhenqi, a financial official with the Jilin Provincial People's Congress, was quoted in the Xinhua report.

At the end of 2010, the total assets of FAW Group, an automaker and backbone of the local economy in Jilin Province, were only 172.5 billion yuan ($26.72 billion). This compares with the annual investment worth more than 1 trillion yuan announced by Jilin over the past several years, Zhao said.

In the first half of the year, Dalian, a major city in Liaoning Province, reported a much lower GDP growth rate compared with other Chinese cities of a similar size.

The sharp decline resulted from a drop in its industrial growth, Yu Debiao, an official with the city's Commission of Economy and Information Technology was quoted as saying.

"For instance, in the first quarter, the industrial growth fell 29.9 percent from a year ago, and we believe that price and demand factors only accounted for 10 percent of the slowdown. The remainder is a correction from the previously high, false figures," Yu was quoted as saying.

In the first three quarters of 2015, the annual GDP growth rate was 6.3 percent in Jilin, 5.5 percent in Heilongjiang and 2.7 percent in Liaoning. In the national ranking of 31 provincial-level localities, the three provinces ranked 28th, 29th and 31st, respectively.

"Verifications by relevant departments showed that at least 20 percent of some investment figures were inflated," said Guan Yingmin, an official with the industry and information technology authority in Northeast China's Heilongjiang Province.

Heilongjiang alone squeezed out tens of billions of yuan in "bubbles" under its investment category over the past two years, Guan said.

Heihe, a city located in the north of Heilongjiang, falsified 1.9 billion yuan worth of investment projects, with the falsified sum accounting for 8.5 percent of the city's total investments in 2013.

The Xiuyan Manchu Autonomous County located in the eastern mountains of Liaoning, falsified 847 million yuan of fiscal revenue. The figure was 2.27 times the county's actual fiscal revenue in 2013.

The Central Commission for Discipline and Inspection and the National Audit Office (NAO) made the figures public in January.

Forging phony figures

One way of falsifying fiscal revenue involves local finance departments that first allocate funds to tax-paying institutions and then levy the money back, according to media reports.

The falsified figures include those for the local GDP growth, investment, consumption, exports and imports, funds spent on the renovation of run-down areas, as well as urban and rural residents' income.

"If the figures hadn't been tampered with so much, the repercussion wouldn't now be so severe," Xinhua said, quoting officials.

In the end of 2014, Fuxin and Huludao, two cities in Liaoning Province, faked the number of newly commissioned housing projects. The non-existent projects accounted for 52.8 percent and 29.3 percent of the two cities' total projects, respectively.

The NAO said in October that 23.7 percent of construction projects it audited nationwide in August were behind schedule, Xinhua reported. The 193 slow-moving projects involve a total investment of 286.9 billion yuan, according to a NAO report following audits of 29 provinces, 29 central departments and seven centrally administered State-owned enterprises in China.

Taling, a township in Liaoning, reported a fiscal revenue of 25.34 million yuan in 2013. The figure was 17.24 times of the township's actual revenue.

Pulandian, a city in Liaoning, cut its public fiscal revenue for 2014 to 3.39 billion yuan from the 5.34 billion yuan it projected at the beginning of the year - a 37.5 percent drop.

Tempted to tamper

Officials are tempted to tamper with figures, even though they understand the damage that inflated figures can do, for reasons including superiors' appraisals, promotions and the competition from adjacent localities, the report said.

And the task of falsifying figures was broken down among different levels in the administration system and assigned to many public servants.

"The double-digit GDP growth rates of the past decade look good but are flimsy, and now every province is squeezing out the bubbles in the figures," Jin Donghai, a deputy major of Fuxin, was quoted by the report.

The report urged the accountability, reforming the system and bringing those who produced the false figures to justice.

Yet, the report pointed out that in reality, few officials lose their jobs for falsifying figures. And with so many people involved, it is nearly impossible to pin down who should be held responsible for this.

This fact somehow leads more local officials to fake figures.

Newspaper headline: Bursting bubbles

Posted in: Insight

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