August 31, 2017 10:00 am JST

Chinese provinces heed Xi's calls for accurate GDP data

Liaoning posts almost 20% decline in nominal growth rate for January-June

ISSAKU HARADA and DAISUKE HARASHIMA, Nikkei staff writers

Chinese President Xi Jinping, left, with Premier Li Keqiang at the National People's Congress in March (Photo by Akira Kodaka)

BEIJING/DALIAN, China Chinese President Xi Jinping's campaign against inflated economic data is starting to catch on, with Liaoning Province reporting a plunge in nominal gross domestic product that likely reflects a departure from past practices.

Real GDP in the northeastern province grew 2.1% on the year in January-June, and both consumer and wholesale prices gained. Nominal GDP, however, shrank 19.6% to 1.02 trillion yuan ($153 billion), even though logic dictates that if prices are on the rise, nominal GDP should outperform real GDP.

Gov. Chen Qiufa, Liaoning's No. 2 official, acknowledged in January that a number of cities and counties had been overstating fiscal revenues from 2011 to 2014. Although Chen did not refer to any individual statistics, multiple indicators are believed to have been inflated to make revenues appear better, an impression bolstered by the recent GDP figures.

During the National People's Congress in March, Xi told representatives from Liaoning that legitimate figures were the most appealing ones. It is highly unusual for Xi to refer to statistics in meetings with representatives of an individual province.

Considering that Premier Li Keqiang, who rose through the ranks of the Communist Youth League, once served as the Communist Party chief of the province, Xi's comments were likely a veiled warning to the league ahead of a party leadership reshuffle this fall.

Whatever the president's motives, Liaoning seems to have heeded the warning. The sharp drop in nominal GDP was likely the result of accurate reporting for January-June in comparison to the inflated figures for previous periods. "Roughly speaking, Liaoning Province inflated GDP by about 20%," one Chinese official said.

Liaoning has long been rumored to be falsifying its economic data, given its continued growth according to official figures despite the downturn in its heavy industries. It reported negative growth for the first time in January-March 2016, but a local business manager said the economy had been facing trouble before then.

China's anti-corruption watchdog announced in June that Jilin Province and Inner Mongolia had also been falsifying data, and in August the central government passed a law to crack down on inflated economic data. As the net tightens, more provinces could admit to similar wrongdoing.

But regional officials are still rated primarily on local GDP and tax revenue. Pressure to meet high growth targets set by the party also play a factor in overstating figures. Structural reforms will be crucial to ensuring accurate reporting.

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