Statistical formulas outdated

The International Energy Agency (IEA) is casting doubt over China's GDP growth in the first quarter. The IEA says that the first-quarter GDP data published by the world's third largest economy don't make sense in light of its declining oil and power demands.

The IEA is not alone. As soon as the National Bureau of Statistics (NBS) released the country's first-quarter economic figures, some domestic scholars and media expressed skepticism about how the country's industrial output could increase while its power consumption decreased.

According to the statistics, China's GPD grew 6.1 percent in the first quarter year-on-year, compared with a 3.5 percent decrease in its oil demand during the same period. And the country's industrial output was up 5.1 percent despite a 3 percent fall in power consumption.

Accurate statistics are necessary for authorities to make objective and scientific decisions. Inaccurate statistics make decisions difficult.

The NBS has to make some adjustments to the figures reported by local governments (sometimes big ones) because some local governments overstate their GDP figures to display their political achievements or underestimate their economic numbers to shirk financial burdens.

The national statistics authorities are open-minded in the face of nationwide doubts about China's conflicting macroeconomics figures for the first quarter.

Li Xiaochao, a department director at the NBS said at a press conference that he was also puzzled about the phenomenon and that he hopes a joint study is conducted to explore the underlying reasons.

The Wall Street Journal carried an articled on April 10 written by Tom Orlik, who once served in the British financial department, alerting the Chinese government of a possible statistical game. Four days later Ma Jiantang, head of the NBS, demanded the article be published on the bureau's official website for bureau-wide study.

The bureau, together with the Ministry of Supervision and the Ministry of Human Resources and Social Security, issued a regulation on May 1, stipulating that an accountability system be set up to hold relevant officials accountable for major statistical mistakes.

In an interview with Xinhua website early this month, Cheng Zilin, director of the bureau's department of policies and regulations, admitted that there are a number of complicated factors behind the country's statistical fabrications and the bureau has not yet come up with any effective ways to root out the problems.

But Cheng assured people that the country's current statistical data is likely not too far off the mark because the country's 5,000 largest businesses, whose industrial output accounts for half of the country's total, must report their economic performance directly to the NBS.

Different official and academic bodies often give different statistics figures and thus draw different or even opposite conclusions because each employs their own set of statistics methods. This often puzzles the public.

China is now undergoing complicated economic changes, making updated and scientific statistical formulas necessary.

The national statistics authorities are making efforts to improve in this regard.

Retail sales volume statistics, for example, are not accurate since the current formula for calculating them does not adequately distinguish between public and private purchasing.

Similar problems exist in the unemployment and per capita income statistics. The outdated statistical formulas need to be changed to better depict the actual situation.

Ye Tan is a finance and economics commentator in Shanghai

(China Daily 05/25/2009 page2)