It has long been suspected but never proven. Now Liaoning Province, in the rust belt of northern China, has admitted to faking its economic growth data. The fabrication occurred between 2011 and 2014, the provincial Governor Chen Qiufa told a meeting of the local legislature.
But as is often the case in China, the Communist Party did not say by how much the data had been over-stated, although it said fiscal revenue was inflated by as much as 20 per cent in some years.
More tellingly there has been no pledge to restate the numbers for that four year period in either provincial or national accounts.
The revelation will give further voice to the China bears, even though Liaoning was considered something of a renegade province which has been hit by major corruption and vote buying scandals in recent months.
But the timing could not be worse given China's full-year GDP numbers will be released on Friday.
These are set to be equally questionable, as in each of the first three quarters China's economy grew at exactly 6.7 per cent.
Implausible numbers
That an $US11 trillion economy which is being buffeted by weak global trade, the strong US dollar and tepid domestic demand would not deviated by a single percentage point in nine months seems implausible.
And in his speech to the World Economic Forum on Tuesday, President Xi Jinping indicated full year growth would also come in at 6.7 per cent – indicating the fourth quarter number will be very similar to the previous three quarters.
That China's economic data is not entirely accurate is hardly a new theme – in 2012 the sum of all provincial GDP was 5.76 trillion ($1.1 trillion) greater than the national figure.
But despite such anomalies most analysts believed the national GDP figures showed the general trajectory of the economy.
This notion is now under threat.
The official GDP numbers show the most gradual of decelerations from around 8 per cent growth in mid-2013 to current levels of 6.75 per cent.
The Capital Economics China Activity Proxy tells a very different story. It shows growth falling sharply at the end of 2014 from 6 per cent to around 4 per cent.
According to Capital it bounced around these levels until early last year when China embarked on a massive credit stimulus, pushing growth back up towards 6 per cent.
"Growth accelerated for a sixth straight month in October to the fastest pace in nearly three years," Capital said on November 22, when its most recent proxy was released.
Capital believes this level is unsustainable and China's growth will move back to a range of between 4.5 per cent and 5 per cent in 2017.
Looking at the numbers
In coming up with its number Capital, a private economic consultancy based in London, looks at electricity production, passenger traffic volumes, credit, seaborne cargo, domestic freight volumes and floor space under construction.
These are also open to manipulation, but the Capital index, which shows the type of volatility experienced by most others in the region, appears to give a more accurate picture of the Chinese economy.
It shows growth weaker than the official data and trending down this year, which has prompted Beijing to place increasing strict controls on moving money overseas.
Protecting the currency from a major devaluation is shaping up as a key government priority for 2017, after the yuan declined 7 per cent last year.
This has seen Beijing gradually sell down its foreign exchange holdings, offloading $US66 billion worth of US Treasuries in November, the largest monthly sale since 2011.
China still holds more than $US1 trillion worth of US government debt, but is now ranked second, behind Japan, as Washington's largest creditor.
In move also related to protecting the yuan, the State-owned Assets Supervision and Administration Commission (SASAC) on Wednesday further tightened regulations on government-backed firms making investments overseas.
The stricter rules come after Chinese firms invested a record $US170 billion offshore in 2016, up 44 per cent from the previous year.
