View: If it is too good to be true, it probably isn't always - China's economic statistics

This article is contributed by a kind reader of JC Economics Essays

For many economists and pundits who long believed that China’s incredible provincial and national economic growth figures seemed too good and neat to be accurate, they now have reliable confirmation of their scepticism. While long dismissed as speculation or myth, there is now official news confirming their suspicions. 

What happened?

In 2017, the Chinese government finally admitted that some of its outstanding economic data was made up… which means that some of the economic figures were invented, created, man-made.

Before these shocking revelations, there had been many suspicions: an economic study by Harry X Wu in June 2015 estimated that from 1978 to 2012, China’s Gross Domestic Product (GDP) grew by 7.6%, which would be around 2.6% lower than the official 9.8% economic figure. Perhaps he got closer to the truth than we realise. In fact, it might have been interesting to note that Wu’s (2014) results indicated that Chinese Total Factor Productivity (TFP) growth was negative from 2007 to 2012. Over-building, over-capacity, under-utilisation, and the advance of the Chinese state into private sector markets were also substantially dragging China’s economic growth down.

Yet, despite this doom and gloom in the economic analysis, and the many suspicions, it was reported cheerily in official news that China’s economy expanded by 6.7% in the third quarter of 2016. Economists have sometimes wondered why China’s economic growth figures often look right on track to hit the central government’s target economic growth rates.

And in January 2017, China’s northeastern Liaoning province, which relies on the production of steel as its economic growth engine, reportedly inflated its economic growth figures from 2011 to 2014. 

The sheer scale of this economic deception is quite staggering. This province has a population of about 43 million, which makes it bigger than California in the USA. And this is the first time the Chinese government has publicly admitted to faking official economic statistics at any level. 

Also, what makes this economic case even more surprising is that fiscal revenues in Liaoning were inflated by at least 20% during the same period, and some other economic data there were also fabricated. These actions can be partly attributed to the incentives that rational and utility-maximising Chinese officials face when it comes to economic data. It is said (in Chinese) that Chinese officials produce the economic numbers, and the economic numbers produce officials in turn, which means that massaging economic data can help one get ahead in Chinese officialdom. People respond to economic incentives.

It can be quite breath-taking to think that the economic books are cooked. Some of the faked economic figures are in fact quite dramatic. According to the news agency Reuters, one county in Liaoning province reported an extra fiscal revenue of 847 million yuan (around US$131.3 million) in 2013, more than double the actual figure. And in one of the years, Liaoning’s GDP growth figures were reported at 9.5%, far above the current figure of a mere 2.7%. A pittance! 

And Liaoning had failed to hit government economic targets in key economic metrics in 2016, including economic growth, fixed asset investment, and exports. Since 2014, when Liaoning stopped inflating its economic growth figures, fixed asset investment, an important proxy measure of construction work, had been declining 60% to 70% per annum.

In China today, the falsification of local economic statistics apparently still happens in some areas from time to time, and the government will occasionally issue stern warnings of heavy punishment for those who fake official economic figures. Enforcement seems to remain an issue for China as it continues its economic rise. There are many economic implications: Investors may have to think twice about investing in China; their economic figures have to be taken with a pinch of salt; and most importantly, and surely not just tongue in cheek, there should be many, many jobs for real statisticians in China. 


JC Economics Essays. This is an economics blog with opinions. This economics article was contributed by SS. We thank our readers for their kind and generous personal contribution to this economics blog. The views and perspectives expressed in this article are the author’s own views and based on his own research and are all made in his own private capacity. The sources are available online and also publicly, although the framing and opinions are his. To recap, JC Economics Essays is an economics resource also has useful sample or model economics essays, economics questions, A level Economics examination techniques and economics case studies. Thank you for reading and cheers. 

Economics Posts [1] - What Kind of Society Would I Want to Live In?

Adapted and excerpted from Ryan Foo - special thanks to Ryan for his article

What kind of society would I want to live in?

I was thinking about what I would do if I was given free reign over an economy or country. How would I run the country, what kind of tenets would I want to govern it by? What kind of questions would I have to ask, and what decisions would I have to make?

And here are some of the thoughts I fervently scribbled down while thinking about this issue. Now I'm assuming I somehow inherited the country - I don't have to fight a democratic battle or justify my decisions yet. Maybe I will in future, but right now I'm just a young dreamer, am I not?

What kind of society do I want?

Freedom, free market capitalism.

Equality of opportunity, not outcome.

People will vote with their dollars, leading to efficient outcomes. The right goods will be produced for the right people, in the right amounts, due to the invisible hand. Good, efficient companies that will be aligned with the social good.

Taxation would serve a Pigovian purpose rather than a redistributive purpose. I want to have my society be run by one of the central tenets of "equality of opportunity, not outcome". Sounds very similar to Singapore so far. However, I'll implement a high estate tax because I would want to level the playing field for the younger generation thus far. I believe this is one of the central problems of unfettered capitalism - that wealth begins to pool in the hands of the elite few. This is what I wouldn't want to happen within my society - wealth and happiness should be a reward for the individual largely on his own level and not meant as a way to gain power over others in a dynastic manner. I'd be pretty uncompromising on this.

Small government. The government's role would be to provide essential services such as the police force, the military, and emergency services. It would also be to regulate key industries such as the healthcare industry, education, and nudge the polity in the direction of what is good for them. I would also tax traditionally sinful products such as gambling, cigarettes, alcohol and drugs - the harmful kind. Careful regulation of the drugs and narcotics industry would lead to higher quality, safer consumption, Of course, we will want to nudge our citizens away from these no matter what. 

Only those who work hard should be able to afford such 'luxuries', shouldn't they? Just as those who work hard should be the only ones who are able to afford expensive cars. This view might be flawed and require more polishing.

This brings me to the question: does my ideal society value freedom of the individual more or do I really just want to mould my people into ideal citizens? Am I taking a more utilitarian or paternalistic approach then? We're still desperately trying to find a way to make citizens align with helping the social good without taking away their liberty. As such, fiscal policy would be centered around pushing the social good.

This is because I believe that dollar votes will eventually lead to efficient outcomes for the individual and will maximise utility for all parties involved - it incentivises you to work for your fellow man, to provide a service that others seek, and get rewarded in due kind for it. If you can contribute more, and people value your contributions, they will reward you with their dollar votes. This might sound barbaric to some. I think it's beautiful.

For example, if enough people value the social good - to combat global warming for example - they will reward those who are willing to do work towards combating global warming. In reality, we are not all self-serving, rent-seeking individuals, so why argue like we are such people? 

However, I do not dispute the point that perhaps we are not serving the social good enough, if the vast majority of us remain apolitical and even ignorant, which is why I believe that education can be our great social leveller.

In this society, how would I encourage research and development and discourage rent seeking (for example, of pharmaceuticals)? That's another important question to answer.

Source: http://ryanicale.blogspot.sg/

JC Economics Essays - Special thanks to Ryan Foo for his excellent sharing (originally posted on his blog) on society. Thank you. 

This is an interesting and thought-provoking question. What would you do one day if you were to be given free reign over an economy or country? How would you run a country, what kind of philosophical basis or tenets would you want to build and grow it by? What kind of hard questions would you need to ask, and what kind of decisions would you have to make? What kind of assumptions would we need to make to make such decisions for a country?

Ryan discusses wealth accumulation and estate taxes: A question arises: would unfettered capitalism really lead to wealth accumulation and income inequality, or is this purely an assumption that we are making? Could it be market failure (or many failures for that matter) or government failure that really leads to income inequality and huge wealth? What other economies or societies could you conceive of, and would they be better or worse structured and organised - and in which particular aspects, or all of them? There are many interesting questions from this reflection. 

Thank you for reading, and cheers. 

Economics Posts - Series on Social and Economic Issues

In late 2015, I was attending a talk at Civil Service College (CSC) on social enterprises and the varied, interesting, and exciting work that many of these social enterprises and voluntary welfare organisations do on several fronts, when one of the presenters impressed me with a rather curious idea. 

Through the guise of tuition (or tutoring, teaching, coaching, or any other phrase that conveys the same idea), this particular social organisation would spread and seed ideas on social change, so as to build social capital in Singapore. 

In other words, instead of direct advocacy or promoting social ideas, this organisation used General Paper as a medium to teach and engage on what they thought was useful, relevant, and important. 

Tuition became something more than just drill and practice, but also something that could get students to think, analyse, reason, and reflect on. 

Tuition became something far larger than it was normally conducted, and for that reason lessons were discussions, innovative engagement methods, and seminar sessions instead of drills, rote-learning, and direct instruction. 

I had a talk with the boss of the enterprise during the Question and Answer segment, and also had the opportunity to learn more about him and his exciting work, right from the horse's mouth. 

I thought that this whole idea and conceptual set-up was a brilliant idea. 

Simply brilliant. 

I also then thought of how I could apply these insights to improving my economics site as well. 

In a similar way, in a large part, this entire economics website has been mainly devoted to A level economics essays, with some useful and relevant articles on economics essay questions, economics case studies strategies, and examination-related materials. In fact, this economics site started many years ago with contributions from economics students on various test or examination questions. On certain occasions, in this economics site, I have also posted undergraduate and masters economics essays, but these were often for academic purposes - writing that was meant to address examination questions or to respond to tests, assignments, and qualifying examinations. 

The CSC presenter got me thinking:

I should have a series on social and economics issues, perhaps with a focus on Singapore but also on the region (since Asia is after all, a rising force to be reckoned with - socially and economically - and Singapore is right at the heart of Southeast Asia and ASEAN, and by extension the rest of Asia). 

That way, while it is a slight departure from the A level economics essays focus of my site, and moves a bit away from academic economics essays, I can take this opportunity to hopefully inspire, encourage, and bolster social and economics education. 

Economics can take on a more positive form of relevant posts, no longer a "dismal science" and not purely an academic exercise for the sake of passing, or excelling, in examinations, but a real subject of interest. 

Through this series, I hope to add value to the economics essays focus of this site, and bring about some inspiration, encouragement, and strengthening of a social and economics education. 

All in all, hopefully this will help readers see the importance and relevance of a beautiful subject meant, among other things, to address society's issues and to help government policymakers promote employment, keep prices stable and affordable, create new jobs for citizens while raising their standards of living, and embracing globalisation. 

This is a beautiful subject meant to encourage critical thinking about issues that we read about in the newspapers today, on companies merging, closing, opening, and expanding. 

Important social issues of why schools close (due to demand and supply), why population and demographic issues matter, why income inequality is a consequence of market failure rather than a problem with capitalism and useful markets, and why Singapore's workfare might be a more useful and long term solution rather than welfare (and what is welfare anyways) can be better understood in the light of a relevant economics education. 

I have requested contributions of essays, posts, and articles from some of the most curious young minds I know, and have also drafted some essays of my own for this series. 

Special thanks to my friends and talents who have contributed. 

Hopefully, these essay contributions can expand readers' thinking and inspire readers to understand the beauty of this subject. 

Thank you very much for reading and cheers!

JC Economics Essays - JC Economics Essays is an economics blog with model A level (H1, H2, H3) economics essays and responses on a range of themes and topics. These economics essays are written by former economics students, NIE-trained teachers, and JC economics tutors, and the editor of this website himself. While this economics site is primarily aimed at A level economics students, undergraduate students and the general reader can also benefit and learn economics. Thank you for reading and cheers!