Bill Bishop’s excellent Sinocism reminded me of a great anecdote from 2010. As the Wall Street Journal wrote at the time:
BEIJING—China’s finance ministry changed the accounting of some government spending in a way that enabled Beijing to announce a deficit below the symbolic level of 3% of gross domestic product for 2010, an examination of budget documents shows.
Under standard accounting, the 2009 budget would have been 2.2% of GDP, and the 2010 budget 3.5%, but for some reason that was deemed unacceptable and some transformation were undertaken to keep the official deficit under 3.0%. It’s unclear what changing the methodology while announcing the changed methodology actually accomplishes. This is not terribly unlike what was happening a couple of years ago with air pollution statistics in Beijing, where the city put out official measures from stations with clean air, far away from the stopped traffic on the 3rd ring road and only measuring PM10, not PM2.5. The city laid out these short-comings yet continued to report them. After time and shaming from the US Embassy’s air pollution twitter feed, the city relented.
One could imagine that maintenance of such a target could be problematic. If the symbol becomes both politically significant and unobtainable, then failing to reach it would demonstrate the failure of the regime to achieve a goal. Sweeping such changes under the rug, though, might seriously undermine confidence should the accounting shenanigans become exposed at some later date.
This 2010 story is a important to remember as the center begins another audit of government debt. As the economy slows, the regime clearly is interested in knowing how high debt levels already are to know how much stimulus the economy can absorb without throwing too much good money after bad.