The enigma of China's GDP statistics

One plus one equals two. But it's not always the case, especially when you are talking about the calculating of local and national gross domestic product (GDP) data in China.

After the National Bureau of Statistics (NBS) on Monday unveiled economic data for 2013, what grabbed the most attention was not only the 7.7-percent annual growth figure, but also a somewhat peculiar math problem.

China's GDP amounted to 56.9 trillion yuan (9.3 trillion U.S. dollars) in 2013. However, the aggregate of the provincial GDP figures, which were independently calculated and released, was about 2 trillion yuan more than the 56.9-trillion-yuan figure arrived at by the NBS, even though three of the 31 localities that were yet to release the figures were not included.

This has aroused suspicion among Chinese netizens that some growth-obsessed local officials have cooked the books. Actually, the combined economic output of China's provinces has long exceeded that of the national level compiled by the NBS.

For 2011, the aggregate GDP figure of all localities was 4.6 trillion yuan more than the NBS tally of 47.1 trillion yuan. In 2012, the aggregate figure was 5.76 trillion yuan higher than the total of 51.93 trillion.

OVERLAPPED CALCULATION

Officials and experts attributed the divergence mainly to overlapped calculation among different regions.

"This is an old problem which recurs every time the data is released. The gap is mainly caused by duplicating calculation," Zhang Liqun, researcher at the Development Research Center of the State Council, told Xinhua.

Overlapping calculation often occurs when a big company has many subsidiaries, Zhang explained. In this case, the added value of the subsidiaries tend to be double calculated.

An official at the country's top economic planning body, the National Development and Reform Commission (NDRC), echoed the view at a press conference on Wednesday, saying that the existence of a large amount of trans-regional economic activities might cause double calculation.

Unlike the calculation of the nations' GDP, where you have customs to clearly define the attribution of added value, it is very difficult to define which part of added value belongs to which provinces in the case of trans-regional economic activities, explained Cong Liang, deputy head of the NDRC's department of national economy.

"In this case, overlapping calculation is unavoidable," he added.

Cong also pointed to price divergence among different regions as a major factor for the gap.

"For a certain product, you have a price in, for instance, Hebei Province. But the price of the same product would be different when it is sold in Beijing. However, the NBS statistics are based on a unified nationwide price."

GDP OBSESSION

In addition to double calculation and price differences, experts pointed to the so-called "GDP obsession" of local officials as another key factor for the gap between national and local data.

"It is possible that the national and local aggregate figures are not in accordance, but that is not reasonable if local figures are higher year after year than the national, and never go in the other direction," Yang Yongshan, former chief statistician of the Shaanxi Provincial Bureau of Statistics, told Xinhua.

Yang said the data collected and calculated by the NBS was relatively accurate, while some local officials, under the pressure of "performance evaluation," tend to try to keep up with others by setting higher GDP growth targets.

Chinese leaders have recently set new standards for local officials, stressing that their performance cannot be simply based on regional GDP growth rates, but should include resource and environmental costs, debt levels and work safety.

However, it is still difficult for some officials to change their mindset and stop setting too great a store on GDP growth figures.

At the press conference, even Cong of the NDRC admitted to the phenomenon.

"Due to local officials' obsession with governing performance, the local figures will be more or less overblown. The NBS is working hard to correct this," he told reporters.

SOLUTIONS

Cong downplayed the importance of the data discrepancy, saying that the two trillion yuan only accounted for about five percent of the total and was not a big error when compared to the huge total figure.

However, experts said if the gap between local and national GDP data remained for a long time, the credibility of the country's statistics would be dented, and the government might be misled to make wrong judgements about policy effects and macroeconomic conditions.

To solve the problem, the central government is making manifold efforts.

In conducting the latest economic consensus, China will unify the way it calculates provincial economic output to help close the gap with national figures, NBS chief Ma Jiantang said earlier this month.

In addition, Ma vowed to fight fake data reporting. In 2013, the NBS investigated nine cases of fake reporting and held 57 statistics staff accountable.

Experts also suggest the assessment standards of local officials' performance be comprehensively changed.

"In assessing local officials' performance, we should not lay too much stress on GDP growth rate, but also care for areas related to social well-being, including improving the employment rate," said Cai Zhizhou, a researcher with Peking University.

Cai pointed out that ordinary people in developed economies care more about data on their social well-being such as employment and the consumer price index.

Wu Xiaoling, vice chairperson of the Financial and Economic Affairs Committee of the National People's Congress, recently called for the cancellation of local governments' GDP statistics, questioning the reasonability of local stats and citing local officials' distorted concept of performance as a result.