http://www.atimes.com/atimes/China_Business/KH05Cb01.html
Aug 5, 2009
SUN WUKONG
-
China produces a wages miracle
By Wu Zhong, China Editor
HONG KONG - China's National Bureau of Statistics (NBS) has with its latest release of economic data again become a target of public censure for suspected fabrication of statistics.
This time, even state-run media are making high-pitched criticism, slamming "too-good-to-be-true" figures for aggravating a "crisis of confidence" in government numbers.
On July 27, the NBS said the actual per capita income of urban Chinese reached 8,856 yuan (US$1,296) on average in the first half of this year (or 1,476 yuan a month), a growth of 11.2% from a year ago. Even average cash income (excluding income in kind) of farmers jumped 8.1% to 2,733 yuan per capita in the same period.
This shows that despite a slowdown in economic growth as a result of the global financial crisis, China's citizens still managed to increase their incomes. In other words, the latest statistics suggest that average income is outgrowing the nation's economy, for according to an earlier NBS report, China's gross domestic product (GDP) grew only 7.1% in the January-June period.
The NBS income statistics were immediately rejected and ridiculed by the public. Commentaries on state-run media openly questioned their reliability, saying the figures were too good to be true, given widely reported bankruptcies and massive layoffs in the first half of this year.
"Increase in figures, decrease in income" was the title of a commentary in the Qianjiang Evening News. The income data add to public distrust of government statistics, to the extent that even state-run Xinhua News Agency opened a discussion panel on its website to let people vent their anger amid what it called "a crisis of confidence in [official] statistics".
The income data certainly seem to contradict other statistics.
An index designed by the People's Bank of China (PBoC) to measure how comfortable people feel living with their current incomes registered a negative 8.6% in the second quarter, the lowest since the index was launched in 1999. (The higher the figure, the more comfortable people feel they can live with their present incomes).
While such an index is more or less subjective, it is supported by hard data from other departments. The Ministry of Human Resources and Social Security said at least 20 million migrant rural workers had lost their jobs in the first half of this year, as many factories, particularly in export-oriented industries, either closed or scaled down production. The Ministry of Education said about 40% of the more than 6 million university graduates this year were still struggling to find employment.
Many of those who have kept their jobs complain about pay cuts or the absence of pay increases. A senior staffer with a government-related institution in Shenzhen said, "We were promised early last year we would get some pay raise this year. But now we are told no increment is possible due to the economic downturn."
Her's is not an isolated case. Talk to wage-earners in China these days, and few say they have received a pay rise.
The NBS gets its income statistics through a sampling survey on randomly picked families in various regions. With so many people losing their jobs, and with no pay increment for wage earners (not to mention pay cuts), how can average income have grown?
One possible explanation is that many people have made profits in the stock market, which rebounded strongly in the first half. But this is unlikely to have driven up incomes to a measurable degree. The investment wisdom of small investors in China is to stubbornly hold whatever shares they have bought until they can make some profit.
Small investors rushed to buy stocks during the market bubble in 2007, when the Shanghai Composite Index (SCI) shot to over 6,000.
Despite the strong rebound in past months, the SCI now stands at just over 3,400, leaving many small investors still deeply "trapped".
Another possible reason is that the rich have become even richer, strengthening their contribution to the average figure. However, the Ministry of Finance said the amount of income tax it collected in the six months to June rose only 0.7% to 214 billion yuan, compared with the year-earlier period, and the growth was 26.5 percentage points lower than a year ago. The increase of income tax did not correspond to the increase of average income. If the rich did become richer, they defaulted on paying their due income tax. Authorities must launch an investigation. In reality, however, the rich may have been among the biggest losers during the economic slowdown.
The NBS income figures are also inconsistent with its past statistics. Ordinary people in China have complained that they struggled to benefit from the country's fast economic growth, and that their incomes had always gained at a slower pace than GDP growth, even according NBS statistics. The state has taken the lion's share of the economic growth cake. Just take recent years for example.
According to the NBS, China's annual GDP growth in the 2005 to 2008 period was 9.9%, 10.7%, 11.4% and 9%, while urban citizens' average per capita income grew 9.6%, 10.4%, 12.2% and 8.4%. Yet the state's income from taxation (excluding customs duties and land-related taxes) increased 20%, 21.9%, 31.4% and 17% in those years.
Only in 2007 did the income of urban residents even slightly outgrow the economy, and then probably because many made some extra money from the bubbling stock market - the Shanghai Composite Index almost doubled that year, to a year-end 5,262, from 2,728. The state also benefited from this, through increased revenues from the stamp tax on stock trading.
If people's income normally grows slower than GDP when the economy is booming, how can it outpace GDP amid an economic downturn? Even using common sense, one would suspect the reliability of the latest income figures.
Yet NBS staff may not have deliberately fabricated the statistics; they are more likely to have been misled by local officials. Growing suspicion about the accuracy of the nation's GDP growth figures has led the NBS in recent years to collect for itself some, but not all, of the raw GDP data it requires, rather than trusting information past up to it by regional authorities. The bureau nevertheless still relies on regional authorities for most of its raw data.
This year marks the 60th anniversary of the founding of the People's Republic of China and it is politically correct to show and praise improvements in the people's livelihood under communist rule. In line with this, it is important for local officials to demonstrate "great progress" under their leadership.
Needless to say, an increase in income is the most important indicator of an improvement in livelihood. From this perspective, it is reasonable to believe that the income figures gathered in the regions and sent to the NBS were inflated.
The NBS, however, cannot shirk its responsibility. Given the obvious inconsistency of the income growth figures with other economic statistics, it should have double-checked them before releasing its findings.
The NBS is a central government department. Statistics it provides are a major reference used by the central government in making economic policy.
While ordinary people may treat its false data with black humor or bitter jokes, policies based on such false statistics could have disastrous outcomes.
The current "crisis of confidence" in official statistics, if not properly handled, could lead to a no less serious "crisis of confidence" in the government's economic policies.
.
Aug 5, 2009
SUN WUKONG
-
China produces a wages miracle
By Wu Zhong, China Editor
HONG KONG - China's National Bureau of Statistics (NBS) has with its latest release of economic data again become a target of public censure for suspected fabrication of statistics.
This time, even state-run media are making high-pitched criticism, slamming "too-good-to-be-true" figures for aggravating a "crisis of confidence" in government numbers.
On July 27, the NBS said the actual per capita income of urban Chinese reached 8,856 yuan (US$1,296) on average in the first half of this year (or 1,476 yuan a month), a growth of 11.2% from a year ago. Even average cash income (excluding income in kind) of farmers jumped 8.1% to 2,733 yuan per capita in the same period.
This shows that despite a slowdown in economic growth as a result of the global financial crisis, China's citizens still managed to increase their incomes. In other words, the latest statistics suggest that average income is outgrowing the nation's economy, for according to an earlier NBS report, China's gross domestic product (GDP) grew only 7.1% in the January-June period.
The NBS income statistics were immediately rejected and ridiculed by the public. Commentaries on state-run media openly questioned their reliability, saying the figures were too good to be true, given widely reported bankruptcies and massive layoffs in the first half of this year.
"Increase in figures, decrease in income" was the title of a commentary in the Qianjiang Evening News. The income data add to public distrust of government statistics, to the extent that even state-run Xinhua News Agency opened a discussion panel on its website to let people vent their anger amid what it called "a crisis of confidence in [official] statistics".
The income data certainly seem to contradict other statistics.
An index designed by the People's Bank of China (PBoC) to measure how comfortable people feel living with their current incomes registered a negative 8.6% in the second quarter, the lowest since the index was launched in 1999. (The higher the figure, the more comfortable people feel they can live with their present incomes).
While such an index is more or less subjective, it is supported by hard data from other departments. The Ministry of Human Resources and Social Security said at least 20 million migrant rural workers had lost their jobs in the first half of this year, as many factories, particularly in export-oriented industries, either closed or scaled down production. The Ministry of Education said about 40% of the more than 6 million university graduates this year were still struggling to find employment.
Many of those who have kept their jobs complain about pay cuts or the absence of pay increases. A senior staffer with a government-related institution in Shenzhen said, "We were promised early last year we would get some pay raise this year. But now we are told no increment is possible due to the economic downturn."
Her's is not an isolated case. Talk to wage-earners in China these days, and few say they have received a pay rise.
The NBS gets its income statistics through a sampling survey on randomly picked families in various regions. With so many people losing their jobs, and with no pay increment for wage earners (not to mention pay cuts), how can average income have grown?
One possible explanation is that many people have made profits in the stock market, which rebounded strongly in the first half. But this is unlikely to have driven up incomes to a measurable degree. The investment wisdom of small investors in China is to stubbornly hold whatever shares they have bought until they can make some profit.
Small investors rushed to buy stocks during the market bubble in 2007, when the Shanghai Composite Index (SCI) shot to over 6,000.
Despite the strong rebound in past months, the SCI now stands at just over 3,400, leaving many small investors still deeply "trapped".
Another possible reason is that the rich have become even richer, strengthening their contribution to the average figure. However, the Ministry of Finance said the amount of income tax it collected in the six months to June rose only 0.7% to 214 billion yuan, compared with the year-earlier period, and the growth was 26.5 percentage points lower than a year ago. The increase of income tax did not correspond to the increase of average income. If the rich did become richer, they defaulted on paying their due income tax. Authorities must launch an investigation. In reality, however, the rich may have been among the biggest losers during the economic slowdown.
The NBS income figures are also inconsistent with its past statistics. Ordinary people in China have complained that they struggled to benefit from the country's fast economic growth, and that their incomes had always gained at a slower pace than GDP growth, even according NBS statistics. The state has taken the lion's share of the economic growth cake. Just take recent years for example.
According to the NBS, China's annual GDP growth in the 2005 to 2008 period was 9.9%, 10.7%, 11.4% and 9%, while urban citizens' average per capita income grew 9.6%, 10.4%, 12.2% and 8.4%. Yet the state's income from taxation (excluding customs duties and land-related taxes) increased 20%, 21.9%, 31.4% and 17% in those years.
Only in 2007 did the income of urban residents even slightly outgrow the economy, and then probably because many made some extra money from the bubbling stock market - the Shanghai Composite Index almost doubled that year, to a year-end 5,262, from 2,728. The state also benefited from this, through increased revenues from the stamp tax on stock trading.
If people's income normally grows slower than GDP when the economy is booming, how can it outpace GDP amid an economic downturn? Even using common sense, one would suspect the reliability of the latest income figures.
Yet NBS staff may not have deliberately fabricated the statistics; they are more likely to have been misled by local officials. Growing suspicion about the accuracy of the nation's GDP growth figures has led the NBS in recent years to collect for itself some, but not all, of the raw GDP data it requires, rather than trusting information past up to it by regional authorities. The bureau nevertheless still relies on regional authorities for most of its raw data.
This year marks the 60th anniversary of the founding of the People's Republic of China and it is politically correct to show and praise improvements in the people's livelihood under communist rule. In line with this, it is important for local officials to demonstrate "great progress" under their leadership.
Needless to say, an increase in income is the most important indicator of an improvement in livelihood. From this perspective, it is reasonable to believe that the income figures gathered in the regions and sent to the NBS were inflated.
The NBS, however, cannot shirk its responsibility. Given the obvious inconsistency of the income growth figures with other economic statistics, it should have double-checked them before releasing its findings.
The NBS is a central government department. Statistics it provides are a major reference used by the central government in making economic policy.
While ordinary people may treat its false data with black humor or bitter jokes, policies based on such false statistics could have disastrous outcomes.
The current "crisis of confidence" in official statistics, if not properly handled, could lead to a no less serious "crisis of confidence" in the government's economic policies.
.
