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Crunching the Numbers

The high-quality growth concept must be defined, informed and tested by a clear system of statistics and evaluation

By NewsChina Updated Apr.8

Guangdong Province on China’s southeast coast saw the start, 40 years ago, of the nation’s great programme of economic reform and opening-up. Shenzhen was China’s first special economic zone. During the annual session of the National People’s Congress (NPC) in Beijing on March 7, Xi Jinping, the Communist Party of China’s (CPC) General Secretary and China’s president, told Guangdong delegates that the province should now pioneer the country’s efforts to create a “high-quality growth model,” build a modern economic system, promote “across-the-board opening-up” and improve social governance. 
It was the first time the CPC leadership had called for the institutional system to focus on high-quality growth.  

“The institutional system deals with fiscal affairs, finance, investment and fundraising, technology and society. It will take years to install a well-structured system via further reform,” said Yin Zhongqing, an NPC delegate and deputy chairperson of the Financial and Economic Affairs Committee of the NPC in an interview with ChinaReport during the annual session of the NPC in March. To build this system, statistical indicators of performance, and the assessment of the quality of growth, have to be identified and sorted. Yin explained why and how.  
ChinaReport: What is the relationship between good top-level design and high-quality growth?  

Yin Zhongqing: The CPC made clear at the 19th National Congress [in October 2017] and the annual economic conference [in December 2017] that China’s economy has shifted from a high-speed track to a high-quality track. Therefore, boosting high-quality growth must be the overriding purpose and principle for all decisions from now on, whether they are about development trajectory, specific economic policies or macro-economic adjustments.  

Quality has multiple dimensions and involves all aspects of socio-economic development. Further institutional reform is necessary. Policies must be improved to implement the new concept of development [a growth model driven by innovation, coordination, ecological sustainability, opening-up and sharing]. These policies address a full range of issues in an economy, including fiscal and monetary affairs, finance, industries, science and technology, environmental protection and opening up to the rest of the world. Such a comprehensive policy package has to be designed at the top level.  

More importantly, we need indicators of high-quality growth, as well as statistics and assessment methodologies for officials. This is the only way that the principles, tasks and goals set at the 19th CPC National Congress and the recent annual sessions of the NPC and the Chinese People’s Political Consultative Conference (CPPCC) can be realised.  
CR: Why is this system of indicators so important?  

YZ: China is in its third year of implementing the 13th Five-Year Plan [2016-2020]. The National Development and Reform Commission is legally obliged to conduct a mid-term assessment of the implementation of the plan so far and report the results to the Standing Committee of the NPC in 2018. 
I suggest that the assessment should be based on the reality that China’s economy is more oriented toward quality than speed, as well as the new concept of development that was laid out at the 19th CPC National Congress. The existing national indicators of development have to be revised to resonate with a high-quality growth model and provide statistical resources for decision-making on economic policies and macro-economic adjustment. 
The new system of indicators should capture the quality, the new concepts and new characteristics of the economic development. It will serve as a guide. When the new requirements are specified by the indicators, they will be enforced and become the focus of efforts by all stakeholders.  
CR: What are the problems with the existing indicators?
YZ: We need to change the GDP-oriented system. Local governments have been encouraged to seek GDP growth and have been assessed by local GDP records for decades. Indeed, ever since using a GDP-based framework to gauge an economy was proposed in the 1930s [first in the US and widely adopted by other countries after WWII], it has faced a lot of criticism. In 1972, The Limits to Growth [by a Massachusetts Institute of Technology research team], the first report to the Club of Rome [a European think tank], pointed out that GDP did not reflect the environmental costs of economic growth. In China, indicators of green GDP have also been proposed by analysts in recent years. 
Many scholars have found that GDP, as a measure of output based on market value, does not reflect the value of innovation. For example, GDP does not measure the role of new technologies in the increasingly digital economy. This is also true in China. Many think GDP does not cover the new economy represented by Internet-based new businesses. 
As China is shifting to quality-oriented growth from speed-oriented growth, it must urgently establish indicators that define high-quality growth. These should include a statistical system and a performance-assessment system, involving the assessment of officials, in line with the requirements of high-quality growth. 
New indicators should probably include total factor productivity, which can also be broken down into productivity of labour, land, capital and resources. They should also include urban residents with no local hukou [residence permit] into the survey of local unemployment. The government debt ratio should also be included. Other indicators that promote the new concept of development should be set up, including those which cover the balance sheet of natural resources, the Gini coefficient [a measure of the wealth gap], the Engel coefficient [a measure of food spending as a proportion of household income], the median income and the [urban-rural] income gap.  
CR: How can a statistical system be used to promote these aims? 
YZ: Recently, some local governments revised down local GDP growth figures and fiscal revenue. This could affect the implementation of the national budget. The budget spending in 2017 is taken into account when the budget for 2018 is made. The same is true for the 2017 budget, which also took the spending in 2016 into consideration. On top of this, the NPC reviews both central and local budgets. The two cannot be considered separately. 
Since the beginning of the year, two regions declared that their local economic statistics were inflated, after Liaoning Province admitted in 2017 that its nominal GDP in 2016 shrank by 23 percent from 2015 [an inspection team sent by the central government found fake economic data was common in Liaoning]. Inner Mongolia admitted [in early January 2018] that its fiscal revenue in 2016 was only 73.7 percent of the amount it had previously claimed. Its industrial output was also 40 percent [about US$45.8b] less than the figure previously given, making its GDP 18 percent less than the original figure. A few days later, Tianjin Binhai New Area [a special economic zone] officially reduced its GDP results for 2016 by one-third [to about US$105.1 billion from US$158 billion] after adopting a new statistics methodology. [Its official newspaper, The Binhai Times, ran an editorial later, attributing the original inflated figure to a statistical method which it claimed tends to scale up GDP].
All this clearly proves the importance of reforming the system of national economic calculations, as well as statistical methodologies in the labour and service sector. The existing statistics methodology is in need of improvement. Careful research has to be conducted on how to calculate new dynamics [based on the new concept of development] and new sectors in our economy. Economic census and data disclosure are also necessary. It is important to follow any major changes in international statistical practices and theories. More application of big data and Internet technologies will also be useful.  
CR: How can we properly design systems to assess the results of quality growth and the performance of officials in achieving this aim? 

YZ: These assessment systems can only be set up after the record-keeping system is reformed. A national quality infrastructure should be built to improve the capacity to measure, standardise, test and verify the quality of growth. 
The laws on product quality and metrics have to be revised, and legislation on quality has to be put on the agenda. The purpose is to accelerate the pace of putting a legal framework on quality growth in place. 
Simply put, I would suggest that the assessment systems include indicators concerning the quality of growth, including the rise of new dynamics, economic structure, efficiency, people’s living standards, ecological protection, democracy and rule of law and economic security. The quality of statistics must also be supervised to ensure the accountability of those who collect and report them.