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19 Jan 2017

Official Party newspaper reveals China faked its growth figures

Official report reveals fraudulent growth data in China

China is set to release its GDP growth figures for 2016 tomorrow.

On the eve of such a day, a report published by People's Daily, the official newspaper of the Chinese Communist Party, revealed that the local government of Liaoning province had fudged its financial data for years.

The report confirms the existing suspicions harboured by investors and economists over China's growth data.

In context

Official report reveals fraudulent growth data in China

The discrepancies in reported and actual financial figures

The capital of Liaoning province, Shenyang, reported a fiscal revenue of $351 million in 2013. However, a report from the National Audit Office showed that the figure was closer to $160 million. Furthermore, the report said that such malpractices were rampant in the province.

Local governor declares that fiscal data was fudged

Testimony

Local governor declares that fiscal data was fudged

During the 8th meeting of the 12th People's Congress of Liaoning, the governor of Liaoning province, Chen Quifa, said that financial data for Liaoning was faked in the period 2011-2014.

During the peak of the fraudulent activity, some figures were inflated by as much as 23%.

More disconcerting is the fact that this falsification of data, according to several sources, is a nationwide phenomenon.

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Fudging data is a widespread practice

"It's not only happening in Liaoning, but other provinces as well, as local governments are under pressure to show positive GDP figures. Those figures are part of their evaluation KPI system," said Feng Liguo, a China Enterprise Confederation expert.

Reasons

The reasons behind the widespread fraudulent activity

Although China's economic growth has slowed in recent years, the Chinese government still demands high growth figures from local and provincial governments.

It is believed that local officials, as a result of central government pressure, fudged financial data to show that local governments were performing up to expectations.

Furthermore, local and provincial officials depend largely on positive growth data to get promotions.

The problem has to be solved at a fundamental level

"It's good that Liaoning has admitted to it but that won't be enough to solve it fundamentally," said Hu Xingdou, an economics professor from the Beijing Institute of Technology.

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