# _8_ **_How_** _Fas:_ **_Has Chiae IndurJg_** _Grow,?_

that failure to implement accounting conventions artificially inflates reported<sup>output growth,</sup> especia.Uy in the TVE sector, is widely shared within the Chinese economics community.<sup>An</sup> experienced accountant now working with a TVE machinery producer<sup>insists that even in the</sup> capital, failure to adhere to statistical regulations is not uncommon in the<sup>TVE sector; in rual</sup> areas, neglect of these systems is said to be widespread (personal communication,<sup>May 1989].</sup> Officials of the State Statistical Bureau [SSB] agree that output data<sup>from TVE enterprises are</sup> problematic, that current prices are often used to calculate output values<sup>identified as based on</sup> fixed prices, and that the output totals tend toward bias in the upward<sup>direction (personal</sup> communication, May 1989; May 1990]. A position paper issued by<sup>the SSB in response to</sup> claims that its figures exaggerate the rate of industrial growth in recent years<sup>points specifically</sup> to rural enterprise as the chief source of what the SSB sees as a modest<sup>upward bias in its</sup> estimates of real industrial growth [SSB 1988; World Herald 1988].<sup>An extenal researcher</sup> reports that visits to Jiangsu enterprises in the xiangzenQive category<sup>do indicate extensive</sup> mixing of data in current and constant prices, with enterprise leaders<sup>finding it difficult to</sup> explain which data are based on which prices (personal communication,<sup>July 1989]. A paper</sup> prepared by personnel at China's State Statistics Bureau [SSB 1988] reports<sup>that industrial units</sup> at the township (xiang level and above are required to submit monthly<sup>reports of GVIO at</sup> constant prices. The small, dispersed and numerous village-level, jointly<sup>operated (at or below</sup> villane level) and private (gi) enterprises submit only annual figures, and<sup>these are in current</sup> rather than constant prices. Provincial and local statisticai bureaux then<sup>adjust these submissions</sup> on the basis of coefficients derived from sample surveys or surveys of<sup>key enterprises. The</sup> SSB's position paper asserts that these procedures remove most, if not all of<sup>the shuifei (literally</sup> "water content") or upward bias from the output data associated with village-level<sup>industry. The</sup> SSB also points out that figures for these units are not included<sup>in monthly reports of industrial</sup> output [See World Herald 1988 for a summary of debate on the "shuifen"issue].

Despite this explanation from the SSB, examination of available data confirms<sup>the impression</sup> that output data for TVE enterprises, especially figures said to be<sup>based on 1980 fixed prices,</sup> probably overstate the actual expansion of real output, especially<sup>during recent years of</sup> extremely rapid enterprise formation. Prior to 1985, compilations<sup>of TVE data carefully specify</sup> which data are based on 1980 prices; more recent publications conspicuously omit any mention of the price base for output data pertaining to 1985 and subsequent<sup>years r[VP, 1978-85; TVP</sup> 1987; TVP 1988; TJNJ 1988, p. 294. Note that Agriculture 1988<sup>gives TVE GVIO for 1987</sup> at 1980 prices (p. 314) using ;he same data that appear with no<sup>price attrbution in TVP 1988,</sup> p. 261.