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China Catches Province Red Handed in Economic Data Fakery

September 5, 2013 By Young Research

For years we have taken a skeptical view of China’s reported growth rates and overall economic story-line. In stories on inflation, fraud, over capacity, real estate, data inconsistencies, and more, we’ve raised alarms over China’s economic time-bomb.

It seems the problems have gotten so bad that even China’s government has been forced to recognize them and report them. The National Bureau of Statistics announced Thursday that Luliang county had over inflated its industrial output by 158% in the first half of the year. That kind of fraudulent reporting makes investing in China like navigating a mine field. Worst of all, local officials receive their promotions based partially on the economic success of their districts. That’s a picture perfect conflict of interest when they get to report their own growth estimates. Seina reports:

BEIJING, Sept. 5 (Xinhua) — China’s National Bureau of Statistics (NBS) on Thursday announced it had uncovered a serious case involving the faking of economic data by a county government in southwest China’s Yunnan Province.

According to the NBS’s publicized report, the government of Luliang had coerced local companies to report inflated industrial output value, resulting in artificially high economic figures.

Twenty-eight sampled local companies reported a total of 6.34 billion yuan (1.03 billion U.S. dollars) in industrial output value in 2012; however, the actual value was only 2.82 billion yuan, based on initial calculation, according to the report.

Similarly, 25 sampled local companies reported 2.74 billion yuan of industrial output value in the first half of 2013, but the NBS initially verified the actual value to be only 1.06 billion yuan.

Meanwhile, the county was also found to have faked investment data.

Companies complained that if they did not fraudulently report higher data, their reports would be returned by local government departments. They also said that fake reports would ensure they would enjoy favorable policies such as securing bank loans.

The NBS said that the misconduct has seriously affected the authenticity and independence of company data.

The NBS did not specify the reasons behind the county’s faking of data but it is a well-known fact that local government leaders are assessed for their performances based on economic data. Nice-looking data sheets mean promotion opportunities.

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