China Economy: Exaggerated Economic Figures Partly Blamed for Spiraling Economy

Beijing, 13 Mar. It’s not uncommon for economists and analysts to accuse China of inflating economic figures or embellishing economic conditions. Some say the slumping Chinese economy is partly due to government exaggerations.

A report by University of Pittsburgh economist Thomas G. Rawski contends that official statistics from the Chinese government are often vastly exaggerated, and have been for more than a decade.

Beijing, 13 Mar. It’s not uncommon for economists and analysts to accuse China of inflating economic figures or embellishing economic conditions. Some say the slumping Chinese economy is partly due to government exaggerations.

A report by University of Pittsburgh economist Thomas G. Rawski contends that official statistics from the Chinese government are often vastly exaggerated, and have been for more than a decade.

He picks apart official government statistics and has uncovered various inconsistencies, and finds that GDP growth from 1997-2001 was less than one-third of government figures. This is only one such accusation and there are many others that have been made.

The annual session of the Chinese parliament which opened last week was used as a platform to display an air of stability and confidence to the world amid troubled economic times, and project a favorable image of China to the word.

Exacerbating the general economic conditions are concerns over human rights abuses, social tensions, and suppressed criticism of Chinese economic policy. For example, this June marks 20 years since the Tiananmen Square slaughter.

The parliament session, lasting nine days, will serve as a forum for Premier Wen Jiabao to present his “work report”, or the annual policy address. But more than the delivery of the report, it will give Wen the chance to show his commitment and stance to repairing the economy after critics have blamed the government’s tightened policies for causing too much slowdown last year.

Towards the end of 2007, inflation was inching up and the property market was expanding, causing fears of economic overheating. This was countered with a tightening on bank loans, fines for unused land and stricter mortgage policies.

The result was a drop in property investment and a 15% reduction in real estate transactions. The knock-on effect had wide-reaching repercussions in all types of building supply and raw material sectors like steel, air conditioners, and more.

Soon, foreign nations cut back on imports which hurt the Chinese export-driven economy. Unemployment ensued and by then, in the fourth quarter, the economy was seriously feeling the early effects of the upcoming global recession.

The criticism comes at this point – many in real estate development and associated industries and local governments that would have benefited from land sales claim that Premier Wen insufficiently relaxed his measures to counter the slumping economy.

While Chinese citizens and foreigners alike blame Wen and the government, the Chinese government attributes the entire situation to US responsibilities for getting everybody in this mess in the first place. But many blame Wen for exaggerating his measures to control the spiraling economy.

In a unified, one-party, single-minded government, China has little internal checks and balances, and can therefore present any reasonable story it wishes to the world. This is not to say the west does not embellish its figures, but they are not centrally-produced.

No matter what Wen’s stance is, two things are clear: We are in the middle of the largest economic crisis of most of our lives and China is a massive economic power with vast financial reserves, human capital, and totally untapped potential, no matter what it reports.

Chen Xiulian, EconomyWatch.com