|
Imagine piloting a speeding jumbo jet half-blindfolded, relying on wildly inaccurate instruments and controls that respond sluggishly, if at all. That is the daily challenge confronting China's economic managers. It is a tribute to their skill that, in spite of turbulent patches, they have so far kept the economy airborne and broadly on the right flight path.
Economic policymaking is inherently more of an art than a science. In China, it verges on black magic. Not only are policy instruments crude, decisions have to be based on shaky, confusing and sometimes non-existent information.
Economists have long lamented the quality of China's official statistics. Although Beijing is trying to improve them, it has far to go. Even its least unreliable data -- those that can be cross-checked internationally, such as external trade figures -- are disputed by the US.
Anomalies abound. The sum of gross domestic product (GDP) reported by the provinces regularly exceeds the national total. Measured by expenditure, growth accelerated this year. Measured by production, it is unchanged. Private economists' efforts to make the numbers add up have produced a bewildering array of predictions, ranging from a "hard" economic landing to a "soft" one and no landing at all.
Things may become a bit clearer next year, when Beijing is due to revise the GDP figures by basing them on samples constructed from a recent nationwide economic census. The previous census was taken six years ago -- an eternity in such a fast-moving country-when private businesses and services generated far less activity than today.
The new figures could shake some basic assumptions about the nature of Chinese growth. If they show that current data seriously understate the economy's size - as some observers expect - but correctly measure fixed asset investment, recent concerns about overheating and structural distortions could look overdone.
Yet the exercise marks barely a beginning in unscrambling China's numbers puzzle. The census is only a one-off snapshot of an economy in rapid transition and will quickly date. Even more important are the political and institutional problems that bedevil statistics-gathering.
China does not suffer from too few statistics, but too many. Different ministries collect their own data, each using its own methods. So do the central bank and state planners, often measuring different things. The National Bureau of Statistics struggles gamely to make sense of it all - or as much as it can get its hands on.
But the bureau is weak. Only 3.0 per cent of its 90,000 statisticians have university degrees. It lacks both financial resources and political clout. Its local offices are often beholden to provincial governments, whose officials have a strong incentive to massage the numbers to suit their political masters. The bureau has to sell its data to cover its costs and, it is said, to pay ministries to part with information. Furthermore, its methodology is impenetrable.
Other developing countries are in a similar position. But China is different because of its sheer size, dazzling speed of change and growing integration with the global economy. If it stumbles or seriously miscalculates, the reverberations will echo around the world. China's policymakers know this, and that their task will grow steadily tougher as old command economy certainties are swept aside by boisterous market forces. However, they have yet to draw the logical conclusions.
China's economy has opened up dramatically. But its government has not. A pervasive culture of secrecy inhibits communications even between ministries. At all levels, information is viewed as a resource to be hoarded and as a means to exercise power, not as a public good.
Free and accessible information flows are a modern economy's lifeblood. Without them, markets will not work properly, nor will rational investment decisions be made. Unless Beijing creates trust in its methods of monitoring the economy's pulse, by making them more transparent as well as more accurate, they will act as a tourniquet, not a health check.
.................................................
Under syndication arrangement with FE
|