IT IS OUT in the open at last. The mainland's top statistician has confessed to the inadequacies of the national accounts figures for which he is responsible and has pledged to do a better job in the future. Given, as just one example, that last year every province reported an economic growth rate higher than the national average, this hardly constitutes a revelation from Li Deshui, director of the National Bureau of Statistics. But the importance of gross domestic product figures is over-rated anyway. GDP is an obsession of bureaucrats, academics and think tanks that aim to justify their existence by making forecasts in two decimal places. People who actually invest money or run industry are generally more interested in nitty-gritty measures of economic performance. And one that is likely to concern them more than GDP at the moment is how much inflation will be tolerated in the mainland before the authorities tighten the screws on liquidity any further. Rather than dither about GDP, Mr Li would do well just now to make sure that his statistics reflect the true situation in price and money matters. The first chart should put the picture in perspective. The red line represents the year on year change in consumer prices since 1987. There was a huge inflationary bubble in 1988 and the distress caused by bringing this under control became a major cause of the Tiananmen Incident in 1989. It was brought under control only briefly, however. In 1992 paramount leader Deng Xiaoping decided once more that he wanted growth and the result was another inflationary bubble in 1993 and 1994. Common sense then re-asserted itself and inflation was again painfully wrung out of the system. This experience explains why the authorities in Beijing are more sensitive than their counterparts in other countries would be to an inflation rate of 1.8 per cent in October. It is not high but it is clearly on its way back up. Look at the blue line representing food price inflation, a critical component of the consumer price indices in the mainland. In October the food inflation rate was already 5.1 per cent. But there is more to ring the alarm bell. Mr Li has a very good coincident indicator to offer his superiors in the year on year growth rate of the M2 measure of the money supply, represented in the chart by the green line. I have figures for this going back only to 1994 but they are enough. They show a close correlation between money supply growth and inflation and since early last year they have rung that alarm bell ever more loudly. The second chart puts more perspective on this M2 indicator. The red line at the top shows you the mainland's M2 growth rate again, this time since the beginning of 1998. The blue line shows you the growth of M2 in the rest of Asia on a weighted average basis. The difference is considerable and growing. Of course you may argue that there is good reason for the mainland's M2 growth to be higher. The mainland enjoys an economic growth rate of more than 8 per cent while the rest of Asia struggles to get back to an average of even 3 per cent. Higher economic growth requires the fuel of a higher growth rate of money supply. There is also the recognised phenomenon that when income per capita rises rapidly the velocity of money supply slows down as cash is no longer so urgently required for immediate transactions. In simpler terms, there is more buck for every bang of GDP as you grow richer. All this may well be true but it is not complete comfort for the mainland's monetary authorities. They have already made warnings of tighter liquidity and these are more important to investors and industrialists just now than adjustments of GDP figures that no-one fully believes anyway and that have little direct relevance to everyday business conditions. By all means, proceed with your reforms, Mr Li, but widen their scope to take in more than the national accounts. It is those money and price figures that really need to be accurate now.