China’s economy is about 12 per cent smaller than official figures indicate, and its real growth has been overstated by about 2 percentage points annually in recent years
The Communist party evaluates local cadres’ performance based largely on growth in their respective regions.
Since local governments are rewarded for meeting growth and investment targets, they have an incentive to skew local statistics,
The National Bureau of Statistics (NBS) has previously acknowledged that “some local statistics are falsified
NBS has done a lot of work to weed out the fake numbers added by local government, but it just doesn’t have enough power and capacity, nor the right incentives,” Michael Zheng Song, economics professor at the Chinese University of Hong Kong and a co-author of the paper, told the FT. “It would be unfair to blame NBS for fabricating GDP numbers."