Why China’s bad statistics is harmful?

As we know, the quality of China’s statistics is terrible. Either you cannot get the data you need, or you just cannot believe them.

But it is not the worst thing. If China had a free market economy, the scarcity of credible statistics could be compensated by the price mechanism. If you know the price signal is correct, it doesn’t matter whether you have the high-quality statistics or not, because the price could tell you what is scarce and profitable and what is not.

Unfortunately, the case of China is not like that.

China economy is highly controlled by the government. The government and the state-owned enterprises command every aspect of economic life. From the water price to the infrastructure investment, all is decided by the government.

In this case, the scarcity of credible statistics is a disaster.

As Megan Mcardle said:

“…central planners badly need good, comprehensive data. Once you limit the autonomy of local nodes to make decisions, you need some sort of massive data set to overcome information loss as decisions move up the hierarchy.”

So the outcome is:

“The lack of good statistics on economic performance makes (managing the economy) an already near-impossible challenge even more daunting.”