China has inflated its growth pace for the last 9 years - from 2008 to 2016 by an average of 1.7 percentage points, a new study finds. The research was done at the Chinese University of Hong Kong and the University of Chicago. The inconsistency was a result of local governments rewarding for meeting growth and investment targets, authors jot down in the draft paper published in the Brookings Institution. The Beijing-based National Bureau of Statistics are aware of the manipulation and still calibrate the numbers but weren't able to do it satisfactorily since 2008, said authors Chang-Tai Hsieh, Wie Chen, Xilu Chen and Zheng Song.
There was no change in the adjustment by NBS corresponding to the miscalculated numbers after 2008. Instead, they use numbers like exports and imports, tax revenue, railway cargo flow etc. that are less likely to be manipulated to predict the GDP of the world's second largest economy.
The revised numbers show that growth in China has went downhill more severely than suggested since 2008. NBS, China didn't immediately respond to the request for a comment on the issue.
GDP in China has long been under criticism for over- or under-estimating growth or for balancing out the fluctuations. Local authorities, keen to improve their chances of promotion, over-reported the GDP figures by more than 10 percent larger than the national figure.
In recent years, national authority has checked on the firms that has been misrepresenting their stats. The head of the statistics bureau are now claiming that the problems are in the past and from this year, they will compute GDP for the 31 domestic regions.
Tom Orlik, chief economist at Bloomberg said that he is 'cautious' about the paper's conclusion stating that local officials overstated investment is hard to match with the fact that China's capital spending did rise a little too much.
By: Neha Maheshwari