Chinese authorities recently reported that two government officials for two northern provinces had falsified financial performance data in order to meet targets. “Good times or bad, China always seems to post numbers that meet the targets set by central planners,” Arthur Dong, a professor of international relations at Columbia University specializing in Chinese economic affairs told Pacific Standard Magazine.

Great wall of China

According to Kevin Tsui, an economics professor at Clemson University specializing in the Chinese economy, “local government has incentives to manipulate their financial data because local leaders’ promotion opportunities are related to these statistics.” “Producing the numbers that Beijing likes will always lead to promotions and career advancement within the party apparatus,” Dong says. “There is a ‘get what you pay for’ element to the incentive system that encourages provincial leaders to game the numbers.”

But some see this report in a positive light. William Hurst, a political science professor at Northwestern University, says “I actually look at the fact that the central authorities are trying to crack down on this as a positive sign that China’s leaders want a little bit more transparency and more accurate reporting in the economy … This can help preserve some trust among investors—foreign and domestic—and temper panics that can occur in times of crisis.”

https://psmag.com/economics/china-has-been-cooking-the-books