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China Data Doubters See Silver Lining if GDP Readings Massaged

(Bloomberg) -- China's economic data has long drawn doubters. This year's remarkable run of three quarters all posting the same 6.7 percent year-on-year expansion is reviving the skeptics.

That's because the rate falls so perfectly between the government's targeted 6.5 percent to 7 percent range.

Yet if the data is massaged -- and who outside of China's core economic policy makers can really say definitively whether it is or isn't -- there may be a silver lining. One reason: tweaking the economy's main barometer is less harmful than overstimulating with cheap credit just to hit the target, say economists including those at Capital Economics Ltd. and Banco Bilbao Vizcaya Argentaria SA.

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"If policy makers do insist on maintaining such high annual growth targets, it is arguably preferable in economic terms that they simply massage the GDP figures in order to meet them on paper rather than overstimulate the economy in an attempt to hit an unrealistically high target," says Julian Evans-Pritchard, an economist at Capital Economics in Singapore.

The nation's communist leaders vowed to double total output and individual's incomes by 2020 from 2010 levels. That leaves them wedded to a base line of 6.5 percent growth as an annual minimum to get there.

Weighted by swelling debt, excess industrial capacity and the risk of a property bubble in major cities, they're having to walk a fine line to keep growth chugging along toward those goals without triggering a major financial crisis along the way.

The NBS didn't reply to a fax seeking comment. But the statistics bureau has taken steps to improve its readings. In recent years it has conducted a nationwide survey to better capture the burgeoning services sector which prompted a revision of the GDP figures. It has also sporadically released a survey-based jobless rate along with more quarterly readings.

"I'd rather it is not 6.7 percent," Sheng Laiyun, spokesman of National Bureau of Statistics, told a group of reporters last week when asked about the static number for three quarters. "but that's a result of solid calculation."

The GDP data aren't faked or made up, Evans-Pritchard said, because policy makers need to take the economy's pulse. He says the final reading is smoothed by some creative use of the GDP deflator -- a gauge of economy-wide inflation -- that's used to deliver more stable readings.

Massaging data, while better than polluting the environment or piling on debts and boosting asset bubbles, has a cost.

"At stake is the government’s credibility," says Xia Le, chief Asia economist in Hong Kong at BBVA. "Authorities need to adjust their growth target set several years ago to avoid this problem."

To contact the editor responsible for this story: Enda Curran at ecurran8@bloomberg.net, Malcolm Scott

©2016 Bloomberg L.P.