According to China’s National Bureau of Statistics, the nation’s gross domestic product (GDP) rose 6.5% in the third quarter. Experts say this is less than expected and that the country’s economy has started to slow. Part of the reason is likely the availability of capital, as well as early effects of a trade war. No matter what the reason, the information is probably wrong.

Outsiders have questioned the accuracy of China’s economic data for years. In part, that is because skeptics think the government manipulates the information to present a picture it would like the world to see. Also, data collected from across the country could be wrong, particularly at the province level.

In a recent issue of Foreign Policy, senior editor James Palmer wrote:

We don’t know China because, in ways that have generally not been acknowledged, virtually every piece of information issued from or about the country is unreliable, partial, or distorted. The sheer scale of the country, mixed with a regime of ever-growing censorship and a pervasive paranoia about sharing information, has crippled our ability to know China. Official data is repeatedly smoothed for both propaganda purposes and individual career ambitions. That goes as much for Chinese as it does for foreigners; access may sometimes be easier for Chinese citizens, but the costs of going after information can be even higher.

Economists at the Federal Reserve Bank of St. Louis recently wrote:

We found that the Chinese National Bureau of Statistics has improved its source data and its collection practices, making its final official statistics higher quality than those of many counterparts in the developing world. However, due to the country’s complex economy and challenges posed by the transition from a command economy to a market economy, China’s economic statistics remain unreliable.

Two years ago, Ning Jizhe, director of the National Bureau of Statistics, wrote in the People’s Daily. “Currently, some local statistics are falsified, and fraud and deception happen from time to time, in violation of statistics laws and regulations.”

The problem mushrooms when both financial markets and policymakers have to make decisions about the state of the world’s economy and the value of China’s equity and debt. Because China has the world’s second-largest economy, the effects of the distorted data and decisions based on that are inherently flawed.

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