Chinese Companies Forced to Falsify Data, Government Says

March 16 (Bloomberg) -- Bloomberg's Erik Schatzker reports China’s statistics bureau said local officials forced some hotels, coal miners and aluminum makers to report false numbers, highlighting flaws in data tracking the world’s second-largest economy. He speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)

China’s statistics bureau said local officials forced some hotels, coal miners and aluminum makers to report false numbers, highlighting flaws in data tracking the world’s second-largest economy.

Statistics officials in Hejin city in northern Shanxi province gave companies “seriously untrue” numbers to submit for 2011, the Beijing-based National Bureau of Statistics said in a statement on its website dated March 12.

Discrepancies between national and local numbers for gross domestic product indicate the task that remains for officials seeking to bolster confidence in the statistics system. So far, steps have included crackdowns on leaks of market-moving numbers and direct online reporting of data by companies to limit opportunities for provincial officials to massage the numbers.

“The national bureau is demonstrating its resolve in improving the nation’s data accuracy but it has a long way to go,” said Lu Ting, a Hong Kong-based economist at Bank of America Corp. In general, national-level data from the bureau is “more trustworthy” while local numbers “need a closer look.”

The bureau urged regions, departments and individuals to learn a lesson from the Hejin case, without commenting on the frequency of such incidents. It also urged statistics officials to not violate laws and regulations.

Photographer: Forbes Conrad/Bloomberg

Factory workers in China. Close

Factory workers in China.

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Photographer: Forbes Conrad/Bloomberg

Factory workers in China.

Numbers Don’t Add Up

Layers in the data collecting system have added to inaccuracies and discrepancies. In 2011, the 31 provincial-level governments reported a combined GDP of 51.8 trillion yuan ($8.2 trillion), 4.6 trillion yuan higher than the national figure calculated by the statistics bureau, the state-backed Economic Daily reported in February.

The bureau last month started using a unified system to directly collect output, retail sales and investment data from 700,000 companies, to boost accuracy and reduce manipulation, agency head Ma Jiantang said Feb. 14. Any tampering or falsification will be treated “seriously,” Ma said.

The NBS has notified the Hejin government of irregularities and the officials responsible are being “dealt with,” according to the March 12 statement. In a separate release dated Feb. 21, the bureau said officials in Yongchuan district, Chongqing, had interfered in companies’ data reporting in November.

Last year, China jailed two officials for leaking classified economic data in its highest profile crackdown on selective disclosure linked to insider trading.

Secret Information

Wu Chaoming, a researcher with the People’s Bank of China was sentenced to six years in prison for willfully revealing secret information to 15 people in the securities industry, Li Zhongcheng, a state prosecutor said in October. Sun Zhen, a former secretary in the country’s statistics bureau, received five years on similar charges.

The government began public efforts to combat the challenge of leaks in April last year and in July brought forward the monthly release dates for some figures to reduce the chance of early disclosure. Some of those who disclosed information got “handsome” lecture fees for speaking to securities brokerages, while others traded stocks for profit, said Du Yongsheng, a spokesman for the National Administration for Protection of State Secrets.

To contact Bloomberg News staff for this story: Li Yanping in Beijing at yli16@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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