> Zhao Jian’s article was online for just a few hours on August 16th before censors erased it. To Western readers the content would have appeared anodyne, but to a Communist Party official it was laced with dangerous ideas. Mr Zhao, a respected economist, argued that it was hard to grasp why China’s government was not making more effort to stimulate the economy. The most serious economic downturn in a generation had caused uncertainty about the future to “coil around the hearts of the people”, he wrote. “The logic and constraints of decision-makers cannot be understood by the market.”
> The deletion of the article, ironically enough, proved Mr Zhao’s point. China’s army of internet censors routinely purge posts that run counter to the policies of Xi Jinping, the country’s supreme leader. But the realm of what is considered too sensitive has expanded rapidly in recent years, and now includes much discussion about the economy. Academics and pundits who seek to debate seemingly mundane economic matters are silenced. Data that used to be readily available are disappearing from the public sphere. That not only further restricts ordinary people’s already limited freedom to speak their minds, but also harms growth by hampering investment. Most of all, it underscores Mr Zhao’s pressing question: on what basis is economic policy made? What does the government know that ordinary people do not—and how reliable is the information on which it is basing its decisions?
> China’s official economic data have always had their flaws. Li Keqiang, the previous prime minister, once questioned their accuracy. Economists have long grumbled that the National Bureau of Statistics (NBS) does not provide enough detail about its methodologies. But China-watchers used to assume that the data would gradually become more comprehensive and reliable. Instead the reverse seems to be happening. Recent data on China’s capital account have been so contradictory—there has been a yawning discrepancy of about $230bn between customs and balance-of-payments statistics in recent years (see chart)—that America’s Treasury called on Chinese officials to clarify the figures. The resulting explanation was so convoluted that it only further confused matters. On August 19th, to the dismay of investors, China’s stock exchanges stopped publishing daily data on flows of foreign capital, a critical gauge of sentiment. The numbers will now be revealed only quarterly.
> The steady contortion of official statistics seems designed to obscure news that might embarrass the government. For instance, in mid-2023 a professor at Peking University said publicly that there were 16m young people without jobs who did not feature in the unemployment statistics because they had stopped looking for work. If they were taken into account, the professor asserted, the underemployment rate for youth would be over 46%. Within a month the NBS stopped issuing data on urban youth unemployment altogether. Then in January it began publishing an “improved and optimised” figure, which also happened to be far lower. Academics and journalists have had relatively little to say on the subject since then.
# *neican*
> The gradual strangulation of information about the economy is not just vexing for foreign investors and economists. It also raises the same question that Mr Zhao did in his censored article: on what basis do Mr Xi and other senior officials make decisions about how to manage the economy? They are not groping around in the dark. China has long maintained a confidential system for collecting information from academia, the news media and think-tanks. Journalists, researchers and economists are asked to pen “internal reference” reports, or neican in Chinese. These documents are commissioned at all levels of government. Local officials have access to analysis produced by local researchers. Trusted scholars at top universities and think-tanks, meanwhile, produce reports for the most senior leaders in Beijing.
> Neican can be far punchier than material for public consumption. A report might demonstrate, say, that even though local officials talk excitedly about a boom in whizzy technologies such as ai or robotics, the actual benefit to the economy of these industries is woefully small. Academics and journalists can live something of a double life, producing both public reports and those meant only for the eyes of officials. A reporter at Xinhua, the state news agency, for instance, may appear to be churning out nothing but adulatory drivel, but behind the scenes could be writing explosive articles exposing polluting firms or corrupt officials. It is a privilege to be allowed to write internal reports, says one such author, noting that there is intense competition to do so.
> The ultimate question is, how much of all this information filters through to the top echelons of the Communist Party? That is hard to say. Authors often brag about the influence of their neican reports, says Mr Huang, but there are no reliable data about who is having an impact on public policy. A researcher says he is informed if a senior official has made a note on one of his reports, but is not told what the note says. The profusion of think-tanks presumably delivers an enormous number of recommendations to different arms of the government. But Bob Chen, an investor based in Shanghai, recently argued on a local podcast called Baiguan that the centralisation of power at the apogee of the party means that the recipients no longer have the authority to push through whatever reforms the reports might espouse.
> Moreover, it seems only natural that neican reports would tend to flatter the authorities. A state researcher notes that the more positive his analysis is, the better the reception it receives. That provides an obvious incentive to put an optimistic slant on things. The obverse also appears to be true: the same researcher who said he was free to discuss administrative problems also cautions that he never directly criticises policy edicts from on high.
> No one outside the highest reaches of power understands exactly what Mr Xi reads and how he acts on the information. China’s economic policymaking has always been somewhat opaque, but this mattered less when growth was strong and policymakers appeared pragmatic. With growth deteriorating and the bureaucracy becoming more ideological, the dearth of good information about the economy is much more worrying. It may eventually become as big a problem for China’s leaders as it is for puzzled outsiders.
1 Comment
> Zhao Jian’s article was online for just a few hours on August 16th before censors erased it. To Western readers the content would have appeared anodyne, but to a Communist Party official it was laced with dangerous ideas. Mr Zhao, a respected economist, argued that it was hard to grasp why China’s government was not making more effort to stimulate the economy. The most serious economic downturn in a generation had caused uncertainty about the future to “coil around the hearts of the people”, he wrote. “The logic and constraints of decision-makers cannot be understood by the market.”
> The deletion of the article, ironically enough, proved Mr Zhao’s point. China’s army of internet censors routinely purge posts that run counter to the policies of Xi Jinping, the country’s supreme leader. But the realm of what is considered too sensitive has expanded rapidly in recent years, and now includes much discussion about the economy. Academics and pundits who seek to debate seemingly mundane economic matters are silenced. Data that used to be readily available are disappearing from the public sphere. That not only further restricts ordinary people’s already limited freedom to speak their minds, but also harms growth by hampering investment. Most of all, it underscores Mr Zhao’s pressing question: on what basis is economic policy made? What does the government know that ordinary people do not—and how reliable is the information on which it is basing its decisions?
> China’s official economic data have always had their flaws. Li Keqiang, the previous prime minister, once questioned their accuracy. Economists have long grumbled that the National Bureau of Statistics (NBS) does not provide enough detail about its methodologies. But China-watchers used to assume that the data would gradually become more comprehensive and reliable. Instead the reverse seems to be happening. Recent data on China’s capital account have been so contradictory—there has been a yawning discrepancy of about $230bn between customs and balance-of-payments statistics in recent years (see chart)—that America’s Treasury called on Chinese officials to clarify the figures. The resulting explanation was so convoluted that it only further confused matters. On August 19th, to the dismay of investors, China’s stock exchanges stopped publishing daily data on flows of foreign capital, a critical gauge of sentiment. The numbers will now be revealed only quarterly.
> The steady contortion of official statistics seems designed to obscure news that might embarrass the government. For instance, in mid-2023 a professor at Peking University said publicly that there were 16m young people without jobs who did not feature in the unemployment statistics because they had stopped looking for work. If they were taken into account, the professor asserted, the underemployment rate for youth would be over 46%. Within a month the NBS stopped issuing data on urban youth unemployment altogether. Then in January it began publishing an “improved and optimised” figure, which also happened to be far lower. Academics and journalists have had relatively little to say on the subject since then.
# *neican*
> The gradual strangulation of information about the economy is not just vexing for foreign investors and economists. It also raises the same question that Mr Zhao did in his censored article: on what basis do Mr Xi and other senior officials make decisions about how to manage the economy? They are not groping around in the dark. China has long maintained a confidential system for collecting information from academia, the news media and think-tanks. Journalists, researchers and economists are asked to pen “internal reference” reports, or neican in Chinese. These documents are commissioned at all levels of government. Local officials have access to analysis produced by local researchers. Trusted scholars at top universities and think-tanks, meanwhile, produce reports for the most senior leaders in Beijing.
> Neican can be far punchier than material for public consumption. A report might demonstrate, say, that even though local officials talk excitedly about a boom in whizzy technologies such as ai or robotics, the actual benefit to the economy of these industries is woefully small. Academics and journalists can live something of a double life, producing both public reports and those meant only for the eyes of officials. A reporter at Xinhua, the state news agency, for instance, may appear to be churning out nothing but adulatory drivel, but behind the scenes could be writing explosive articles exposing polluting firms or corrupt officials. It is a privilege to be allowed to write internal reports, says one such author, noting that there is intense competition to do so.
> The ultimate question is, how much of all this information filters through to the top echelons of the Communist Party? That is hard to say. Authors often brag about the influence of their neican reports, says Mr Huang, but there are no reliable data about who is having an impact on public policy. A researcher says he is informed if a senior official has made a note on one of his reports, but is not told what the note says. The profusion of think-tanks presumably delivers an enormous number of recommendations to different arms of the government. But Bob Chen, an investor based in Shanghai, recently argued on a local podcast called Baiguan that the centralisation of power at the apogee of the party means that the recipients no longer have the authority to push through whatever reforms the reports might espouse.
> Moreover, it seems only natural that neican reports would tend to flatter the authorities. A state researcher notes that the more positive his analysis is, the better the reception it receives. That provides an obvious incentive to put an optimistic slant on things. The obverse also appears to be true: the same researcher who said he was free to discuss administrative problems also cautions that he never directly criticises policy edicts from on high.
> No one outside the highest reaches of power understands exactly what Mr Xi reads and how he acts on the information. China’s economic policymaking has always been somewhat opaque, but this mattered less when growth was strong and policymakers appeared pragmatic. With growth deteriorating and the bureaucracy becoming more ideological, the dearth of good information about the economy is much more worrying. It may eventually become as big a problem for China’s leaders as it is for puzzled outsiders.
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