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China's H1 GDP sees a 1.4t yuan gap with local govts

By Zhang Jiawei (chinadaily.com.cn)
Updated: 2009-08-04 09:51

The sum of all provincial gross domestic product (GDP) figures for the first half of 2009 in China is 1.4 trillion yuan ($205 billion) larger than a separate national estimate, the Beijing Times reported Monday.

The newspaper's report was based on the first half's data released recently by the country as well as by local governments.

The figures, which should have been equal, or at least close, have sparked a sharp debate over the source of the discrepancy.

The Beijing Times quoted several experts who observed that it has become a trend in China for a city's GDP to be less than the sum of its counties' GDPs, and the figures for each county are less than the total sum of the towns under it, and so on.

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One explanation, advanced by Ye Qing, a professor with Hubei-based Zhongnan University of Economics and Law and also the deputy chief of Hubei Bureau of Statistics, is that local governments double count subsidiaries of large companies in their provinces.

Large companies include their local branches when their main headquarters report revenue. Yet local governments often then count their branch offices again anyway, leading to an inflated provincial GDP figure, Ye said.

The report was skeptical of Ye's explanation, however. It argued that a large company would not bother to set up several branches in a single county and that not enough counties would have large companies to account for the discrepancy anyway.

Instead, the newspaper pointed to lower level governments inflating their economic development figures in order to look good. Lower level governments always claim to have better-than-average performances. If everyone performs better than the average, then where does the average figure come from? The newspaper wondered.

This sort of distorted statistical data can weaken the government's credibility, which can then affect its ability to carry out and design future policies, the newspaper said.

Ma Jiantang, head of the National Bureau of Statistics, quoted by the Shanghai Securities News on July 28 as saying that the discrepancy between the sum of provincial GDPs and the national GDP has existed for years. The GDP figure is usually used as a measurement of local government's performance, which can provide an incentive for local governments to inflate it, Ma said.

Ma proposed that the central government should directly calculate a province's GDP instead.