Learning to trust China's economic data

China’s official data often invites scepticism and criticism regarding its accuracy. In fact, most of the statistics are on the whole reliable and useful, though it is true that some are inaccurate due to problems with their methodologies.

The quality of the data has been debated for years, but economists as well as critics agree that the long-run trend suggested by the numbers is approximately correct. “They are reliable enough for economists to draw valid conclusions,” said Hu Yifan, head of research at Haitong Securities International. “Overall, the Chinese official data is directionally correct.”

The official China Statistical Yearbook, published each year since 1981 by the Chinese National Bureau of Statistics, is the product of its more than 100,000 staff members nationwide. China’s top leaders rely on these statistics in reports presented before the annual meetings of the National People’s Congress, suggesting that they are used for internal planning purposes. They are also subject to review by domestic and international observers.

“The numbers may not be precise,” said Adrian Foster, head of financial markets research at Rabobank, “but they generally tell you where the trend is going without a big divergence.”

No country in the world has precise statistics, he added, pointing out that even the US had also revised its GDP data.

The most accurate data, according to Haitong’s Hu, are the trade statistics. They come from a sole data collector — China’s customs agency — and can be cross-checked against the data of its trading partners.

The most controversial data is the consumer price index (CPI), which is closely watched by everyone from workers to the top leaders. The official numbers often stir fierce debate for their failure to reflect people’s perception of runaway consumer prices.

Hu explained that the CPI survey has failed to adjust to China’s economic development. “The cost of services has been rising sharply in recent years, but it is not fully reflected in the CPI as its weight is underestimated based on the current methodology.”

China’s jobless rate is another controversial subject — the figure has risen by just four percentage points since 2002. The measurement is less than informative as it only indicates the employment status of registered urban residents.

Economists suggest that China needs to have an effective cross-checking mechanism by encouraging more think-tanks, universities and other institutions to design and publish their own statistics.

But Rabobank’s Foster noted that the problem cannot be solved overnight. “China needs to have independent statistical institutions, but there are question marks over the independence of many emerging markets’ data-gathering organisations. China is no exception.”