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CRN: Inflated GDP Hurts China’s Economy

China Review News published a commentary on the gap between the official GDP and the GDP as calculated by totaling the figures from local governments. According to the preliminary number that China’s National Bureau of Statistics released earlier, the domestic GDP for 2012 was 52 trillion yuan (about US$8.3 trillion). However, the total of the GDP figures that the local governments released was 5.76 trillion yuan (about $9.3 trillion), a discrepancy of 5.76 trillion yuan. The two figures have been inconsistent for several years.

According to the author, “the cause of the difference is that the local governments inflate GDP. Apart from statistical standards and technical reasons, the figure bears a direct relationship to how a number of local officials measure their performance. The most direct consequences of this inflated GDP are that it leads to economic data distortion and misguided macro-control policies; it adversely affects the moral integrity of the government and its attempt to build its credibility; and, eventually, it will hurt the healthy and steady development of the national economy and the people’s vital interests.”

Source: China Review News, February 5, 2013