By the Blouin News World staff

China’s murky statistics fog global politics

by in Asia-Pacific.

Chinese Minister of Finance Lou Jiwei pauses while speaking during a briefing at the US Department of the Treasury July 11, 2013 in Washington, DC. Officials from the United States and China are meeting to discusS the two world powers' relationships during the 5th United States and China Strategic and Economic Dialogue.

Chinese Minister of Finance Lou Jiwei on July 11, 2013 in Washington, DC. BRENDAN SMIALOWSKI/AFP/Getty Images

China’s famously questionable statistics will come under more scrutiny as the world’s second largest economy slows, underscoring yet another dilemma facing leaders in Beijing — one enunciated again Tuesday by Xi Jinping, who cited a need to “deepen of reforms in all aspects”.

As a recent U.S. government report noted, the debate about China’s statistics “carries more weight than in the past” because China’s economy is losing momentum and is struggling with “economic imbalances.

While China has made strides in improving the accuracy and consistency of its statistics, the perception that the figures are massaged remains.

The latest example came this month when finance minister Lou Jiwei made comments that were interpreted to mean China’s economy could expand by as little as 7 per cent by year’s end. Later in what Reuters called “an apparent attempt to defuse market worries on a more severe slowdown”, the figure Lou quoted was corrected by state news agency Xinhua to say 7.5 per cent — China’s official growth target. Unsurprisingly, the growth measure in the year to June, released two days later, came in at 7.5 per cent, right on track to avoid a more severe slowdown later in 2013.

Market pundits snicker but the rubbery statistics show China unwilling or unable to assure a consistent measure of its economy, itself a reflection of Beijing’s governance. They may also mask a more dire underlying situation in China, one that makes the political situation more challenging.

As the U.S.-China Economic and Security Commission noted: “accurate statistics can . . . shed light on sensitive problems, like vast income gaps.” And those wealth disparities in China create risks for social stability. Even the perception that China’s economy is stalling runs the risk of upheaval.

Not only are China’s statistics doubt-inducing, they fail to adequately cover off-the-book phenomena such as China’s shadow banking system and copper financing, in which an investor takes loans out against a holding of a commodity to raise cash, sometimes to speculate in other markets.

“Many of the right laws are now on the books to guarantee accurate reporting of investment, but there is a lack of information to distinguish real investments from those that only exist on paper,” the USCC report notes.

Whether China’s economy surpasses the U.S. in size by 2016 or not, it’s already large enough to dislocate markets and reorder global politics. China’s government has little incentive to be forthcoming about conditions in the country if they could lead to disorder or tensions between local, regional and central governments.

In this way, China risks becoming a country with plenty of geopolitical weight but not nearly as much transparency or clarity in its direction. That will be in marked contrast to the U.S., with its let-it-all-hang-out media, which makes reporting on real problems available, even if it must compete with the relentless howl of infotainment, partisanship and apathy.

The statistical vagueness underscores the challenge for the government which wants to curb corruption, while reserving the ability to guide public discourse. Denying the public an accurate view of what’s happening inside China leaves its citizens perpetually hungering for the truth about it — just ask the Chinese activists and dissenters who risk their lives to shed light on government corruption.

The opacity built into China’s economic and political model, coupled with poor accountability in the West after the period of unbridled globalization, make the worldwide appetite for transparency strong too. In China, reformers who lift the lid on corruption, collusion, graft and environmental threats find an eager audience. After all, people in China, like anywhere else, want to know if the formula they’re feeding their children is safe. It’s telling that the government then, despite pledges of a corruption crackdown, often succumbs to their sense of embarrassment and suppresses these reformers.

In this climate, individuals, states and organizations that can offer a clear, untainted view of what is really going on in China, will be rewarded. Even the U.S. has learned the value of accurate statistics to China. Much to Beijing’s displeasure, the U.S. embassy continued to publish on Twitter PM 2.5 particulate pollution readings taken from the embassy during the spell of toxic smog over the metropolis in January.  The results were much worse than the figures published by China.