Sometimes when doing business in China, what you think you see may not always be what you get, Numbers can be misleading and many times western businesses can be lead astray by some very adept Chinese pied pipers. The watchwords of ‘due diligence” and “verify”, “verify”, “verify” are often relegated to the bottom of a list that has the words “profit” and economic survival” perched at the top. Let me further enlighten you by referring you to an article placed today on the Wall Street Journal’s “CHINAREALTIMEREPORT” website today, June 19, 2013. This article is titled, “How China Fudges Its Numbers”, was written by Dinny MicMahon. Mr. MicMahon reports: (
http://blogs.wsj.com/chinarealtime/2013/06/19/
)
“It’s typically advisable not to accept Chinese economic data at face value –as even the country’s own premier
will tell you
. Figures on everything from inflation and industrial output to energy consumption and international trade often don’t seem to gel with observation and sometimes struggle to stack up when compared with other indicators.
How the figures are massaged and by whom is as much a secret as the real data itself. But in an unusual move, the National Bureau of Statistics – clearly frustrated with the lies, damn lies – has recently outed a local government it says was involved in a particularly egregious case of number fudging, providing rare insight into just how just how we’re being deceived.
According to a statement on the statistics bureau’s website dated June 14 (
in Chinese
), the economic development and technology information bureau of Henglan, a town in southern China’s Guangdong province, massively overstated the gross industrial output of large firms in the area.
An investigation by the state statistician into a sample of 73 out of a total 249 firms counted in the data found that 38 were too small to be counted as large firms and so shouldn’t have been included, and a further 19 had either stopped production, moved out of the town or otherwise ceased to exit.
The statement said that 71 companies surveyed by the statistics bureau had industrial output of 2.22 billion yuan ($362 million) in 2012 in total, but that the local government recorded it as being 8.51 billion, almost four times as much as the actual figure.
The data was supposed to be contributed by the firms themselves using an online platform. Instead, employees of the Henglan economic development bureau entered the figures themselves from their office, the statement said. It also said that by May or June last year the relevant government leaders in Henglan knew about the distortions but chose not to do anything about it.
Calls to the Henglan economic development bureau Wednesday went unanswered.
The statistics bureau doesn’t say why Henglan inflated its industrial output numbers. But indications that a local economy is sagging could reflect poorly on the prospects for promotion of local officials, and China’s southern provinces have been particularly hard hit by the global slowdown in demand for the country’s exports. Factories have closed, moving inland and overseas in search of cheaper labor, denting local government revenues.
“When governments are looking to burnish their track record, that can put the local statistics departments in a very awkward situation,” said a commentary piece that ran Tuesday in the Economic Daily (
in Chinese
), a newspaper under the control of the State Council, China’s cabinet. The article said that one of the biggest obstacles to ensuring accurate data is that the agencies responsible for crunching the numbers aren’t independent from local authorities. Moreover, it argues that penalties for producing fake data were too mild to act as a deterrent.
The National Bureau of Statistics said that it pursued the Henglan case on a tip from a whistleblower. How widespread the problem is elsewhere in the country is anyone’s guess. And sure, this may have been going on for years with little real impact on economic decision making. But with China’s growth slowing for first time since becoming a major player in the global economy, artificially inflated figures threaten to further complicate efforts by companies and governments everywhere to gauge what that slowdown means for them.”
It is true, the once vaunted Chinese economy is slowing down noticeably and this is beginning to make many people, including government leaders, apprehensive; wondering which path to follow next. The Chinese economy and those who are the stewards of its destination, may soon be confronted with a “Yogi Berra” moment. The late, great, New York Yankees catcher was a witty and wise man. He once wrote, “When you come to a fork in the road, take it.” Which fork Chinese leaders will take has yet to be determined, leaving the end of their journey as yet unforeseen.