China’s Gamed Economy

Minxin Pei casts a skeptical eye on Chinese growth numbers:

Inflating local growth numbers is so endemic that reported provincial GDP growth data, when added up, are always higher than the national growth data, a mathematical impossibility. And, even when they do not doctor the numbers, local officials can game the system…[by using] financial leverage, typically by selling land or using land as collateral to borrow large sums of money from often-obliging state-owned banks, to finance massive infrastructure projects, as Bo did in Chongqing. The result is promotion for such officials, because they have delivered quick GDP growth. But the economic and social costs are very high. Local governments are saddled with a mountain of debt and wasted investments, banks accumulate risky loans, and farmers lose their land.

April was a bad month for China.