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China's national accounts are primarily based on data collected by local officials. However, as documented by Wei Xiong (2018), local officials are rewarded for meeting growth and investment targets. Therefore, it is not surprising that local governments have an incentive to skew the statistics on local growth and investment. The statistical agency of the Chinese government, the National Bureau of Statistics, attempts to correct this bias using administrative data and other sources of data that it gathers directly. The accuracy of the final numbers of aggregate GDP and its components depends on the extent of misreporting by local officials, the data that NBS has at its disposal to correct the misreporting, and the effort it undertakes to do so.
Local GDP is measured via the production approach from three major surveys—of large industrial sector firms, large service sector firms, and "qualified" construction firms. These data are supplemented with surveys of smaller industrial firms and administrative data from other government departments to obtain a number for local GDP on the production side. On the expenditure side, local officials provide estimates of local consumption, investment, government spending, and net exports (vis-à-vis other localities in China and other countries). The two main sources are surveys of household income and expenditures (similar to the U.S. Consumer Expenditure Survey), from which they estimate local consumption, and survey data on investment projects, from which they estimate local investment. Because the sum of local consumption and investment typically exceeds local GDP measured on the production side, the remainder is attributed to local net exports.
The NBS does not simply add up the statistics reported by local governments to arrive at the national aggregates. The NBS also has access to the micro data of the surveys used by local governments, and it supplements these data with economic censuses and administrative data on such categories as land sales, vehicle registration, financial transactions, and foreign trade. Based on these data, the NBS produces its own numbers for national GDP and its components on the production and expenditure sides. The adjustment made by the NBS to the local statistics can be seen by the discrepancies between local GDP and national GDP.
In this paper, we check which of the numbers provided by local governments differ from...
