The New Year – the western one, at least – may be just two weeks old but Beijing is already on a roll, pledging to clean up Dodge and straighten out those pesky provinces.
China’s economic claims have long tested the boundaries of reality, especially when it comes to GDP. The combined economic output of the provinces regularly exceeds the national GDP, and the discrepancy is sometimes breathtaking.
In 2011, for example, the difference in aggregate between the GDP of the provinces and that of the nation was as great as the GDP of Turkey.
To its credit, Beijing finally appears to have taken the overinflating data problem seriously and the National Bureau of Statistics has pledged to clean up its act. Or at least its accounting practices.
A great help in encouraging provincial officials to toe the new realistic line is a commitment by the top leadership in November to drop the growth-at-all-costs mentality that has so far characterized China’s rapid development. Officials achieving high economic growth are routinely rewarded with praise and promotions, and with the moral benchmark set pretty low among mainland officials at the best of times it is not surprising they embraced this incentive to fudge provincial GDP figures.
What it also did was encourage officials to ignore pollution or collude with businesses to avoid environment regulations that would slow the pace of development.
However, the pledge for a more sustainable approach comes on the back of long overdue plans by Beijing to finally crack down on pollution. Whatever you get after pollution reaches “chronic” levels is where the mainland is at now. All major cities are choking on smog with more polluted days recorded in 2013 than in any year since 1961, according to the National Meteorological Centre.
Beijing is now going to monitor air quality improvements in the provinces and those not meeting targets will see officials “summoned for a chat”, in the sinister words of the Environment Ministry (the vigour with which the current corruption clampdown is being enforced does not exclude the possibility that for the guilty those “chats” could be concluded with a bullet).
Exports is another area coming under scrutiny following revelations last year that Hong Kong is the chief conduit of illicit cash flows into the mainland.
The logistics industry has known about it for years, and may even be complicit, but China’s State Administration of Foreign Exchange first acknowledged there was a problem in the first quarter of 2013 with exporters over-invoicing and inflating trade payments to funnel foreign capital into the mainland for investment. In March the mainland’s exports to Hong Kong surged 93 percent year-on-year, even though the global slowdown was shrinking China’s exports.
Some analysts have estimated that the US$101 billion in foreign exchange brought into the mainland by falsifying export invoices was 40 percent of the country’s total foreign direct investment in 2012. Increased scrutiny by the Foreign Exchange administration seems to be putting the brakes on the practice.
So the year 2014 seems to have gotten off to a pretty good regulatory start, although it will be a big ask for Beijing to reign in wayward provincial officials. But acknowledging the seriousness and scale of the problems is a good start.