Jan 23, 2018 11:51 AM

Editorial: Officials Who Cook the Books Must Be Held Responsible

The cover on economic data fabrication has been blown.

Following Liaoning province’s admission that it embellished its government economic figures a year ago, the Inner Mongolia autonomous region, Tianjin municipality and some other governments have also admitted bloating their data. Inner Mongolia, for example, said it overstated 2016 industrial output by 290 billion yuan ($45.3 billion), or 40% of the region’s total.

The exaggerated figures have made it increasingly difficult for provincial-level and local governments to make corresponding amounts of revenue. Now is a good time to take advantage of the central government’s new policy of emphasizing quality of economic growth, rather than its speed, to readjust the economic figures to their real levels. More governments are expected to follow suit.

Economic data fabrication has been an open secret in China for a long time. The local governments’ self-revelation of the problem is a positive move to getting the country’s economic data closer to reality. However, while many local governments have openly admitted to data fabrication in a high-profile manner, there are few actions being taken to hold those who cooked the books responsible. Authorities should trace back the data deception to find whoever is responsible for the scams, following the chain of data collection and report writing. The scammers should pay for what they did.

Data fabrication is extremely harmful. As key signals of the market, economic data serve as the foundation for macroeconomic decision-making. Watered-down data will hurt the efficiency of resources allocations and make the macro policies miss the targets. They also damage the local political ecology and will have a long-term impact on local development. The inflated figures may appear pleasing on the surface, but local people will suffer — each taxpayer in Liaoning, for instance, has to pay 1,000 yuan more each year to fill in the government’s fiscal gap because of exaggerated industrial output and fiscal revenue.

Some observers might have sung the praises of the few governments’ courage to reveal their own wrongdoings. However, the wrongdoings of data fabrication are far too serious to be excused by “heroic” admissions. Had the central government not sent out inspection teams to check and publicize the data scandals, no one knows when the cap would have been removed.

Fabricating data is punishable by law, including the Statistics Law and the Budget Law. The 47th article of the Statistics Law stipulates that people who violate this law and commit a crime should be held criminally liable. It shows that data fabrication is not just a matter of administrative misconduct. Authorities should openly hold those fabricators responsible according to the law, and publicize nationwide the most serious cases.

If the fabricators can always walk away without being punished, some provincial-level and local governments may become used to the cycle of cooking the books first and then admitting the wrongdoings later, without making any real change. The tradition of new officials’ not having to take care of their predecessors’ troubles should also be broken.

The scandals with various local governments in Liaoning have been publicized several years ago. But the punishments are only warnings or fines so far. Such moves will draw public questions over the effectiveness of the law. A year ago, the National Bureau of Statistics vowed to deal with the Liaoning scandal according to the Statistics Law with a firm hand. Recently, the bureau made a similar gesture. The public will watch closely and see if the big promises will go through a “soft landing.”

Besides inadequate punishment, the reason why many local officials went all-out to create economic figures also lies in the country’s pressure of performance assessment, which had been leaning heavily toward a place’s gross domestic product (GDP) growth. The vicious cycle of “false data leads to promotion, and officials create false data” must be ended.

The toothless punishment of data fabrication in recent years may be a result of the existing laws being too general and lacking detailed definition of the subjects and the wrongdoings. Fortunately, the situation has been improving. The Central Leading Group for Comprehensively Deepening Reforms, led by President Xi Jinping, in June passed a guideline for punishing people responsible for data fabrication. The guideline clarifies the existing rules. It is urgent for authorities to follow the rules.

The investigation of data fabrication must be thorough. If the key officials don’t ask, the lower government departments will not have strong motive to do so. There were reports that some statistics-related officials were removed from their posts for refusing to forge data. The investigation should not stop with the statistics officials. The top leaders of a provincial-level or local government who explicitly or implicitly suggest twisting data must shoulder the major blame. The investigations must be conducted strictly following legal procedures, neither to indulge nor to persecute any people. Only by doing that can the “high-yield, low-risk” data-fabrication business be corrected.

Of course, punishment is not the goal, and punishment by itself cannot enhance data quality. A more sound statistics-collecting system must be established to ensure sound data. In the past two years, the central government has been issuing a number of documents to reform local data collecting and calculating methods to ensure the authenticity of data. In August, a regulation clarifying the implementation of the Statistics Law was released. The local governments have been following up with their various action plans to change the situation, vowing to hold data fabricators responsible and remove any official behind fabrication.

What the authorities need to do next is to follow the regulations and guidelines. Even though the scandal involves a large number of people, the authorities should still hold them responsible, and not be affected by doctrine that “the law cannot be enforced when everyone is an offender.”

The central government has announced China’s transition from rapid economic growth to quality growth. It has created an environment that encourages data fabrication that aims at higher GDP figures. The most important thing is to improve the official appraisal system to a more comprehensive one that highlight the quality of local development. The Central Economic Work Conference, held in December, urged the establishment of policies and performance appraisal systems to ensure high-quality growth. In the near future, the government should also watch out for any attempts by officials trying to forge data again to reflect high-quality growth.

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