Shenyang, the capital of Liaoning Province, China
Analysts who have followed China closely over the years have always had a difficult time believing the official numbers that come out of the country. To many, China’s growth always seemed too smooth and too close to government targets to be believable. But there was never hard evidence that the data was being manipulated.
Now there is. The FT reports that growth in Liaoning Province shrank 23% last year partly as a result of officials’ attempts to undo the effects of previous over-reporting.
Economic output in China’s northeastern industrial province of Liaoning shrank by 23 per cent in nominal terms last year, according to official statistics — showing the extent to which officials had previously exaggerated performance in China’s struggling rust-belt.
The sudden drop in provincial gross domestic product is only partly due to a fall in the real economy — in inflation adjusted terms, GDP fell by 2.5 per cent according to the national statistics bureau.
The main reason for the decline, analysts say, was officials’ attempts to undo the effects of previous over-reporting.
China’s problem of industrial overcapacity has led to factories defaulting on debt, cuts in output and the planned lay-off of millions of coal and steel workers, all of which have hurt Liaoning’s steel-dependent local economy. Last April the province was the first in China to report a quarter of negative growth in seven years.
Last month Liaoning’s governor admitted to state media that fiscal revenues in the province had been inflated by at least 20 per cent from 2011 to 2014.
The official revelations gave credence to economists’ suspicion that China’s economic figures are manipulated by officials for political gain. Local governors are given growth targets to hit, although recently the government has tried to move towards a broader set of performance indicators.
Read more here.
Jeremy Jones, CFA
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