Statistics compiled by China's National Bureau of Statistics have always painted a rosy picture of the Mainland's economy, but the accuracy of its data is often questioned. According to official statistics, China's year-on-year gross domestic product (GDP) in 2001 reached a healthy 7.3 percent. Western economists, however, estimate that it should have grown at the most by 5 percent. That said, foreign companies -- despite doubting China's economic data -- are still eager to enter the Mainland market to benefit from its strong growth.

One possible explanation for this could be that while foreign enterprises are benefiting from the robust Chinese economy, they maintain reservations about government figures. This is understandable, given that data released by the Chinese authorities has long been obscure and limited to "reporting only the good news and not the bad." Such a practice was clearly seen during the beginning of the SARS outbreak, when the Chinese government tried to conceal the true extent of the crisis in China.

The Central Government stands to gain little from concealing economic growth figures. Conversely, a clearer picture would help it understand more clearly how the entire nation is developing and enable government to better formulate appropriate economic policies. So the real problem seems to stem from the various methods employed in China for collecting statistics, in addition to the integrity of the country's statisticians.

Improving data collection

China used the employ the "physical product balancing method" imported from Russia and Eastern European countries. In the mid-1980s, it gradually introduced a national accounting method based on the system used by most market economies worldwide. Today, these two methods are used simultaneously in China to measure the country's planned and market economies.

Another discrepancy is that figures recorded at the provincial and municipal levels are usually higher than those announced by the government. In 2001, all provinces and cities in the country, excluding Yunnan, reported GDP growth higher than the national average. Despite overlapping data of two or more provinces and cities, the discrepancy should have been insignificant, but inflating figures is partly due to the Chinese practice of promoting officials based on the economic performance of their jurisdictions.

The National Bureau of Statistics attributes discrepancies to "the Central Government and local authorities adopting different statistical methods." This suggests that the bureau does not take into account provincial data in compiling national statistics, and does not have a standard data-collection method throughout the country.

Another problem is that some Chinese statisticians lack integrity. As China's official records show, the total number of offences against Statistics Law from May to October 2001 was 62,000. Concerned about inaccurate reporting, then Chinese Premier Zhu Rongji presented a plaque to a statistics college engraved with the words "no false accounts." Despite having a sound monitoring and penalty mechanism to catch inaccurate accounting practices, China needs to tighten the enforcement side of these laws.

Although some statistics are question-able, China's rising foreign exchange reserves demonstrate its rapid economic growth, in addition to expanding retail sales. Some large foreign financial institutions put China's economic growth for 2002 at 10 percent, even higher than the official 8 percent reported by the government. As China's role in the global economy is increasingly important, it needs to be more transparent, and to this end, the National Bureau of Statistics has been working to improve its data-gathering process to enhance its international credibility.

Last month, the bureau unveiled a new national accounting method that includes calculating GDP to reflect more accurately the level of national economic development and provide a foundation for macro economic control and decisions.

Compared to the "China Economic Statistical System (Interim Measures)" that came into effect in 1992, the "Chinese Economic Statistical System (2002)" dropped the physical product balancing method. It also revised the classification of "related authorities and industries," restructured the institutional framework, added new variables and modified the design of accounts to match the system unveiled by various international associations in 1993, including the United Nations.

The new system incorporates a host of mechanisms to more accurately reflect the development of China's market economy. Compared to the old system, which measured economic growth for a planned economy, it reports the sale and trade of retail services in addition to merchandising. It also differentiates between public and private capital, compared to reporting only fixed asset investment in the old system, as well as gathers data on China's substantial grey, or underground, economy. As a result, the National Statistics Yearbook 2003 is expected to be far more accurate, which is undoubtedly good news for economists.

Integrity cannot be built overnight. China needs time to earn the trust of economists on the quality of its statistics. Because of the SARS outbreak, it appears to have recognised the importance of accurate information, and demonstrated its commitment towards reform. Therefore, it is reasonable to hope that China's economic growth in future can be clearly reflected in its statistics.