Chinese Statistics: Start with Skepticism

Derek Scissors /

When the Chinese government is the sole source of information, how much of it should be believed?

In terms of economic performance, not that much. The Wall Street Journal’s Tom Orlik, author of a book on the subject, challenges those skeptical of Chinese numbers to make a better case. Challenge accepted.

To be clear, it is not true that Chinese numbers are wrong all the time. Also, China does not always overstate its economic performance. GDP growth was slower in 2011 than Beijing claims, but it was faster in 2010. In fact, the economy is likely larger than the government reports.

The issue is whether to start by largely believing official statistics or start (extremely) skeptical, as Chinese Premier-designate Li Keqiang himself does. This is indeed a book-length topic, but the case for skepticism can be built from a short list of core economic indicators:

Finally, GDP growth is so smooth for a rapidly growing economy that any reasonable person would be puzzled. The reason for false smoothness is the same as for the absence of data on coal, housing prices, bad loans, and unemployment: The government will not publish sensitive information. This is obviously true both in and out of economics. Within economics, the question is what is and isn’t manipulated for political benefit. With that question in mind, we should all be skeptics.