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China Economy

Chinese province admits to cooking its books

Liaoning governor says many cities and counties across the province massaged economic figures, with some local governments inflating fiscal income by up to 23 per cent

PUBLISHED : Wednesday, 18 January, 2017, 1:37pm
UPDATED : Thursday, 19 January, 2017, 3:49pm

Liaoning province has confirmed long-standing suspicions that some of its economic data, including fiscal revenue, was faked between 2011 and 2014.

“Many cities and counties in Liaoning reported fraudulent economic figures,” governor Chen Qiufa told the provincial legislature on Tuesday, citing a document from the National Audit Office.

“The fake fiscal figures influenced the central government’s economic judgment and accordingly led to a lowering of the size of transfer payments to the province,” he said.

It also meant local residents carried a higher tax burden because a bigger share of the province’s funds went to central coffers, he said.

Citing the audit report, Chen said the inflation of fiscal data by city and county governments worsened each year from 2011.

People’s Daily reported that by 2014, when the falsification of data was at a peak, some governments inflated their fiscal income by as much as 23 per cent.

The province abruptly reported a double-digit decline in government income in 2015.

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Beijing Institute of Technology economics professor Hu Xingdou said falsifying data was a widespread practice on the mainland.

“It’s good that Liaoning has admitted to it but that won’t be enough to solve it fundamentally,” Hu said.

He called for a clear division between local governments and audit and statistics departments, as well as greater media and public scrutiny of the authorities.

Liaoning, once a thriving base for heavy industry, reported a rare contraction in economic growth last year.

Its economy is weighed down by struggling state-owned enterprises, a reluctance by both private and foreign companies to invest in the area and a population exodus.

It was also embroiled in a political scandal, with many of its provincial lawmakers sacked for bribing their way into office.

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Former provincial Communist Party boss Wang Min, who was in office when the economic data was falsified, was investigated last year for “serious violation of discipline”, a euphemism for graft.

Local officials depend largely on economic growth – the most important factor in their performance appraisals – to gain promotion. The desire for promotion was also believed to be the key motivation behind the faking of the data.

Doubts have also been raised about national economic data, prompting many foreign ­investors to use proxy indicators to measure the country’s real growth.

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Last month, the head of the National Bureau of Statistics warned about the forgery of local data in People’s Daily, the mouthpiece of the ruling Communist Party.

The mainland is due to release its GDP growth figure for last year tomorrow. The figure is largely expected to be about 6.7 per cent.