Finance Ministry Calls Liaoning Data Inflation ‘Severe Breach of National Law’

China’s finance ministry condemned northeastern Liaoning province’s admission this week that it inflated economic data as a “severe breach of national law”, but also praised local officials for their integrity and desire to address existing problems.

The Liaoning governor admitted that economic data it supplied to Beijing from 2011 to 2014 were inflated, following suspicions about China’s most sluggish provincial economy. Fiscal revenues were exaggerated by around 20% overall, while figures were bloated to twice the size of reality in certain counties, official probes found.

“Liaoning’s falsified figures have thrown off central authorities’ judgment of the economic situation, misguiding policies and misleading allocations of state funds to the province,” said the Ministry of Finance in a written statement on Friday, its first response to the scandal. The ministry criticized the exaggerated numbers as a “severe breach of national law.”

But the ministry also commended Liaoning for its decision to come clean on the matter.

“This public affirmation of fabricated figures is worthy of praise, showing integrity and courage to face up to shortcomings,” the ministry said. “May it serve as an example to others.”

China’s 2016 GDP published on Friday showed the slowest economic growth in 26 years, down to 6.7% from 6.9% in the previous year. Last year was the sixth consecutive year the world’s second largest economy has lost steam, while analysts expect the figures to continue decelerating in 2017.

Economic growth targets are a remnant of China’s past as a planned economy, when such figures were common for charting out the country’s development. But such targets often led to falsified figures similar to the Liaoning case, as officials try to avoid penalties for failure to reach centrally-set goals.

Top policymakers have said “maintaining stability” is a prime goal for the coming year, though no nationwide GDP targets have been set yet. Lack of any specific target announcement has led observers to believe the government may forgo setting annual growth targets in the future, easing pressure on local officials to inflate data.

Contact reporter April Ma (fangjingma@caixin.com)