China Is Under Pressure To Clean Up Its Statistics

AFTER years as the ultimate spin doctors, China's statisticians are confronting new demands: credibility and accuracy.

Since the Communist Party came to power in 1949, government number-crunchers have manipulated, colored, and even buried data to serve volatile political masters and to justify a collapsing central planning system. The decade-long Cultural Revolution, a period when data-gathering was abandoned as ``unscientific,'' left a statistical black hole in history that cannot be filled.

But with the planned economy retreating before an emerging capitalist marketplace, and foreign investors and forecasters demanding to know more about the world's hottest economy, China faces new pressure to clean up its reputation for statistical deceit and legerdemain.

Despite its bureaucratic army of 2 million data-gatherers, China exists in a statistical fog in which information is hidden and hard to come by. Public and private research institutes have mushroomed as Western firms such as the Gallup Organization open shop in China. The State Statistical Bureau, for years the bastion of closely held economic information, has established a marketing research subsidiary that compiles an industrial data base. Its clients include AT&T, Proctor & Gamble Company, and Amoco Corporation.

The bureau is moving from outdated socialist accounting to econometrics and other Western methods; it has hired Western economists as consultants and is soliciting joint ventures in the United States, Britain, and Hong Kong to market its economic information overseas.

People's Daily, the official Communist Party organ, says the government is moving closer to international accounting practices by focusing more on investment, profits, pricing, and production.

To burnish its credibility and boost Beijing's ability to manage the national economy, the government last month announced a crackdown on statistical fraud among provinces and localities. Since the center reinstated data research after economic reform was launched 15 years ago, local statistical bureaus have systematically inflated data to win Beijing's approval, or underestimated statistics to receive more government funding.

FACING a wave of official corruption and growing rebelliousness among provinces anxious to chart their own economic futures, Zhang Sai, the bureau director, warned that distorted statistics are increasing tensions between Beijing and localities.

``There is a problem with China's statistical work ... because the whole orientation has to be shifted. We copied the old system from the Soviet Union, and this no longer fits into the current system,'' says Zhang Zhongji, a bureau official. ``Since we have taken the market orientation in statistics, we have to walk on two legs: government data and separate units that sell our services.''

Yet, information is still a scarce, politically sensitive commodity in what remains a highly secretive society.

The country's vastness and its fragmented economy make data collection costly, time-consuming, and prone to manipulation and error. China was virtually starting from scratch when the government launched reforms in 1979; even unemployment figures did not exist.

Statistics such as inflation and economic growth, which analysts say are drastically understated, are only released after high-level scrutiny and with the correct political spin to ensure compliance with official targets.

Fearful that rising prices could fuel growing social unrest, the government reported that the annual inflation rate eased slightly in April to 21.7 percent. But Western economists contend that the inflation rate is racing at more than 40 percent in Beijing and other major cities.

To stop the price spiral, government leaders set the 1994 inflation target at 10 percent, regarded as virtually impossible by many Chinese economists. At a recent meeting with senior leaders, one Chinese economist said his colleagues suggested 12 percent might be more realistic.

``But the leaders said no because it would send the wrong message to the regions and cities which want faster growth,'' he recounts. China has set a 9 percent growth target next year, below the 13 percent of 1993.

Such manipulation has made foreign businesses wary of Chinese statistics and has forced many to generate their own, executives say. An American banker says he combines published statistics with other data he can gather to produce reports that ``at least my bank can trust.''

Unless China improves the quality and flow of financial information, the dearth of data could retard economic progress and the development of nascent financial markets, Western analysts say.