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Red-handed: China province admits faking economic data

Becky Davis
Cars are assembled in a workshop of an automobile factory in Shenyang, northeast China's Liaoning province (AFP Photo/)

A Chinese official has admitted his province falsified its economic data for years, state media said Wednesday, vindicating long-held suspicions that China has been cooking the books.

The announcement by the governor of the industrial province of Liaoning comes as the world's second-largest economy prepares to release 2016 data that is tipped to show the slowest growth in more than a quarter of a century.

China's Gross Domestic Product (GDP) figures are a closely watched measure of economic growth in the country, which affect business and financial decisions around the globe.

Speaking at a legislative meeting Tuesday, Liaoning's governor Chen Qiufa admitted that from 2011 to 2014, economic data from the province's cities and counties had been plagued with false statistics, the official Xinhua news agency said.

In 2014, it said, a central government inspection group warned Liaoning about the "prevalence of economic data fraud".

In one 2013 case, a county reported its government revenues were 127 percent more than the actual figure, Xinhua cited the country's top anti-graft authority and National Audit Office as saying.

Following the fraud-busting investigation, Liaoning in the first quarter of 2016 became the first province in years to report negative growth, according to reports at the time -- although it is unclear whether there is a direct connection.

Officials and analysts in China and abroad have long questioned the accuracy of Chinese economic figures, which many suspect are often manipulated to make the economy look more robust than it really is.

Chen's statement was a rare admission of a systemic problem that is believed to plague China's economic data reporting.

A major issue is that local bureaucrats' promotions are tied to economic performance, giving them an incentive to falsify data in hopes of improving their chances of career advancement, Xinhua cited Chen as saying.

Even Premier Li Keqiang has expressed doubts about the accuracy of the country's GDP figures.

Leaked US diplomatic cables show that as the top official in Liaoning province in 2007, he told the then-US ambassador that such data was "man-made" and thus unreliable.

"'GDP inflation' has become like a chronic disease -- it's not unique to Liaoning alone," wrote Xinhua, but even so the province's sins were "comparatively serious".

In December, the director of China's National Bureau of Statistics accused local officials of "falsifying" economic statistics and warned that offenders would be severely punished.

-- Hotbed of fraud --

On Friday, China will release its official report on economic growth in 2016, as analysts see mounting risks with Donald Trump heading for the White House just as Beijing tries to pull off a tricky rebalancing.

The economy expanded 6.7 percent in 2016, according to the median projection in an AFP survey of 23 economists. That compares with 6.9 percent in 2015 and is the weakest since 1990, a year after the bloody Tiananmen Square crackdown isolated the country internationally.

China's leaders are trying to shift from reliance on exports and infrastructure investment as a growth driver to consumer spending.

But the transition has proved bumpy, with the manufacturing sector struggling in the face of sagging global demand and excess industrial capacity left over from an infrastructure boom.

Liaoning Province, located in China's northeastern "rust belt", has become a prime target for the reforms, with its numerous lumbering state-owned coal and steel businesses.

The province has been a hotbed of fraud in various fields.

China's parliament, the National People's Congress, in September voted to unseat 45 deputies from Liaoning for involvement in vote buying and electoral fraud.

An additional 523 deputies from the region's lower provincial congress were found to be involved in election-related fraud as well, in a case Xinhua at the time hailed as "unprecedented".