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Posted: 07 Dec 2010 02:13 AM PST
We’ve harrumphed more than occasionally on the dubious quality of Chinese official releases (see discussions on GDP, inflation, and other drive-by-data-shootings for a selection of past grumblings). So we are delighted to see that Wikileaks is on this beat too. (hat tip the Pragmatic Capitalist, courtesy reader Arthur K). From a March 2007 cable on a discussion between Clark T. Randt and “Fifth Generation Star Li Kequiang”:
¶1. (C) Liaoning Party Secretary Li Keqiang, a front runner for elevation to the Politburo this fall and potential successor to President Hu Jintao in 2012, described the challenges he faces as a provincial leader to the Ambassador over dinner on March 12. Engaging and well-informed, Li related that despite brisk economic growth, Liaoning’s income gaps remain severe. To create a “harmonious society,” he has tried to guarantee minimum living standards by providing new housing to the destitute and a job to every household. The public is dissatisfied with education, health care and housing, but it is corruption that truly incenses them…..This Wikileaks release, like so many others, is not news to anyone who has been on this beat. For instance, Foreign Policy had a 2009 feature article entitled “How China Cooks Its Books”. Some extracts:
¶4. (C) GDP figures are “man-made” and therefore unreliable, Li said. When evaluating Liaoning’s economy, he focuses on three figures:
1) electricity consumption, which was up 10 percent in Liaoning last year;
2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and
3) amount of loans disbursed, which also tends to be accurate given the interest fees charged.
By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are “for reference only,” he said smiling.”
In February, local Chinese Labor Ministry officials came to “help” with massive layoffs at an electronics factory in Guangdong province, China. The owner of the factory felt nervous having government officials there, but kept his mouth shut. Who was he to complain that the officials were breaking the law by interfering with the firings, he added. They were the law! And they ordered him to offer his workers what seemed like a pretty good deal: Accept the layoff and receive the legal severance package, or “resign” and get an even larger upfront payment….I strongly encourage you read the piece in full.
Such open-secret programs, writ large, help China manipulate its unemployment rate, because workers who “resign” don’t count toward that number. The government estimates that roughly 20 million migrant factory workers have lost their jobs since the downturn started. But, with “resignations” included, the number is likely closer to 40 million or 50 million, according to estimates made by Yiping Huang, chief Asia economist for Citigroup. That is the same size as Germany’s entire work force. China similarly distorts everything from its GDP to retail sales figures to production activity. This sort of number-padding isn’t just unethical, it’s also dangerous: The push to develop rosy economic data could actually lead China’s economy over the cliff….
Pressure to distort or fudge statistics likely comes from up high — and it’s intense…
But local and provincial governmental officials are the ones who actually fiddle with the numbers… “The higher [their] GDP [figures], the higher the chance will be for local officials to get promoted,” explained [Gary] Liu.
And more odd sightings confirm the idea that all is not as rosy in China as the official data would have you believe. Consider this tidbit from the WSJ ChinaRealTime blog (hat tip Michael Perelman):
Despite entering a robust economy that seemed to weather the financial crisis as if were it a middling squall, China’s college graduates on average make only 300 yuan, or roughly $44, more per month than the average Chinese migrant worker, according to statistics cited over the weekend by a top Chinese labor researcher and reported today by the Beijing Times (in Chinese).As the Foreign Policy article suggested, fooling too much with official statistics means you have lousy measures for planning purposes. And there is no indication that China is resorting to the usual Western approach for the need to produce unduly flattering reports: keeping two sets of books.
“It’s the first time China has faced such a situation,” the paper quoted Cai Fang, head of the Chinese Academy of Social Science’s Institute of Population and Labor Economics, as saying Saturday at a conference on Chinese youth. “It’s hard to say how long this situation will last.”
By Mr. Cai’s calculations, college graduates have consistently earned around 1,500 yuan a month since 2003. Migrant workers, meanwhile, have seen their monthly wages rise from an average of 700 yuan to 1,200 yuan over roughly the same time period, MR. Cai said, according to the Beijing Times.
China has faced a surfeit of college graduates in recent years, thanks in large part to an enrollment boom that has seen the university student population swell by as much as 30% year-to-year over the last decade. High levels of unemployment among recent graduates—an estimated one-third of the country’s 5.6 million 2008 graduates failed to find work in their first year out of school—are a major drag on the average wage figures. Meanwhile, labor shortages in manufacturing and construction have enabled migrant workers to demand higher and higher wages.
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