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China s census-takers should be more open about what they can and cannot
measure
Our people crave, more than anything else, to know the extent of the nation,
says the narrator in Do You Love Me? , a short story by Peter Carey set on an
imaginary world that lionises cartographers. To satisfy that craving, the
country carries out a regular, exhaustive census: a total inventory of the
contents of the nation . Helpful householders even move their possessions
furniture, appliances, utensils, heirlooms into the street for easier counting.
China, like many countries, is keen to know its own extent. This year it is
preparing its latest economic census, a twice-a-decade undertaking. Like the
census in Mr Carey s fable, it is a mammoth task . The most recent one
employed 3m people, counted more than 8m enterprises and estimated a GDP of
almost 59trn yuan ($9.5trn at the time). This year s census may find that GDP
per person has exceeded $10,000, enough to form a tidy pile of possessions on
the street.
But why, many people will ask, does China bother? Doesn t everyone know that
its GDP is man-made , as Li Keqiang, the country s prime minister, once said?
Aren t the data fabricated to support the ruling party s narrative of fast and
steady progress? Why pretend that it is an inventory, not an invention?
The critics have plenty of material with which to build their case. China has
now reported exactly the same pleasing growth rate (6.8%) for three quarters in
a row. The economy grows robustly even when vital correlates of production,
such as electricity consumption or rail freight, do not (see left-hand chart).
And China s national GDP figure is laughably out of line with the sum of its
provincial GDP figures. The various levels of government cannot keep their
statistical stories straight.
In recent weeks, China s data have invited further scorn. The National Bureau
of Statistics (NBS) reported that industrial profits in the first five months
of the year amounted to more than 2.7trn yuan, 16.5% higher than a year ago.
That would be a reassuring result in the midst of a stockmarket slump. The
problem is that this time last year the NBS reported that industrial profits
were 2.9trn yuan for the same period of 2017. That would imply a 6% decline
from then until now (see right-hand chart). Similar discrepancies have appeared
in recent retail-sales figures.
In Mr Carey s strange tale, some parts of the country prove increasingly hard
to enumerate. Indeed, these nebulous areas become hard to discern at all.
Unused for agriculture or industry, they become less and less real .
Eventually, they dematerialise.
Something similar may excuse some of the flaws in China s data. China s vast,
protean economy is certainly difficult to enumerate. Small firms and
self-employed entrepreneurs are hard to track. And the biggest part of GDP is
neither agriculture nor industry but nebulous services, a growing share of
which are provided digitally or purchased implicitly, such as the accommodation
that a home can provide to the people who own it.
These measurement difficulties may help explain some of the oddities that
harsher critics delight in pointing out. It is true, for example, that China s
quarterly GDP figures are implausibly smooth. But so are Indonesia s. That
suggests mismeasurement may be as much to blame as manipulation. For the
quarterly numbers, points out Carsten Holz of Hong Kong University of Science
and Technology, the NBS can draw on the data reported directly to it by large
enterprises (those with annual revenues of over 20m yuan). But it remains
largely in the dark about smaller firms. Big enterprises are disproportionately
state-owned. They tend to lumber along at a steadier pace than their private
rivals, which respond more adroitly to market ups and downs. For the rest, the
NBS must make educated guesses, which will err on the side of continuity.
It is also true that China s GDP often grows faster than physical correlates,
like tonnes of rail cargo or kilowatt-hours of electricity, two alternative
indicators once cited by Mr Li. But this may be because GDP reflects the value
of final goods, not simply their volume. An economy that produced 100 phones
last year and 103 this year can be growing at more than 3% annually if the
phones are not only more numerous, but better. (Besides, electricity and
freight are both now expanding faster than China s GDP.)
Many critics who quote Mr Li s scepticism forget that he was talking about
Liaoning, the province he once oversaw, not China s national figures. Several
provinces have since admitted that their figures have been grossly overstated,
presumably to help local leaders win promotion. It should therefore be a source
of reassurance, not scorn, that China s national GDP number is not simply the
sum of its provincial numbers.
Indeed, the NBS has its own survey teams in many parts of China and requires
large enterprises to report data to it directly. That cannot prevent the firms
misreporting figures, but it does stop direct meddling by local officials. And
next year the NBS will take more centralised control of provincial GDP numbers.
Some of China s recent statistical embarrassments may stem, paradoxically, from
its efforts to improve matters. For example, the industrial profits recently
reported by large enterprises were lower than those reported last year because
some under-sized and double-counted firms were purged from the sample.
Retail-sales figures were also revised in light of a new survey, making them
incomparable with those reported last year.
The truth in the fable
Mr Carey s story ends badly for the statisticians. As the world becomes more
nebulous, the census-takers succumb to political pressure, faking information
missing from their surveys. Even so, they are blamed for the disappearance of
things they cannot measure. Once respected, they become disdained.
China s census-takers should be more open about what they can and cannot
measure, inviting outsiders to cross-check their results. In admitting what
they do not know, they will gain credibility. Their past opacity has shielded
them from searching criticism, but exposed them instead to the laziest disdain.
This article appeared in the Finance and economics section of the print edition
under the headline "The critics it deserves"