China’s rise over the past few decades into a global superpower has been staggering. GDP Annual Growth Rate in China averaged 9.7% from 1989 until 2017, reaching an all-time high of 15.4% in the first quarter of 1993. During this period total GDP has risen from $350 billion to $11.2 trillion.
However, the one thing that has held back China’s ambitions is fraud. China is plagued by a reputation for fraudulent activity; a reputation that it has struggled to shake off.
In October, the New York Times highlighted the problem with fake scientific data within China, an issue that's threatening to hold back the region's goal to become "a global scientific and technology power” by 2049.
According to the Times, since 2012, the country has retracted more scientific papers because of faked peer reviews than all other countries and territories put together. In April of this year, a scientific journal retracted 107 biology research papers "after evidence emerged that they had faked glowing reviews of their articles." A few months after this event, a Chinese gene scientist, who had allegedly made "breakthroughs once trumpeted as Nobel Prize-worthy" was forced to backtrack on his research after peers failed to replicate his success.
Falsified academic data is just one of the fraud problems China has. More than 50 US-listed Chinese companies were either delisted or halted from trading in 2011 and 2012 based on claims of fraud and other violations of US securities laws. And at the beginning of 2016, Chinese police arrested 21 employees at China’s most significant online finance business on suspicion of fleecing 900,000 investors for $7.6 billion.
It seems that there's a new China fraud story almost every month. The latest case involves lawmakers themselves.
China's National Audit Office Finds Yet More State Fraud
Over the weekend Bloomberg reported that China's National Audit Office has found ten cities, counties or districts inflated fiscal revenues by 1.55 billion yuan ($234 million). The offending regions were the Yunnan, Hunan and Jilin provinces, as well as the southwestern city of Chongqing. Of the total, 1.24 billion yuan was from the Wangcheng district in the provincial capital of Hunan where officials faked local government building documents to boost income.
It seems that the primary motivation for these regions to fake income documents was to fund additional borrowing. According to Bloomberg, the National Audit Office inspection revealed that counties in the Jiangxi, Shaanxi, Gansu, Hunan and Hainan provinces raised about 6.43 billion yuan in debts by violating rules.
This isn't the first time China's regional governments have been found to be falsifying financial data. In January, the rust-belt province of Liaoning admitted that it had fabricated data from 2011 to 2014 listing 110 million of project funds or hospital operating income as administrative income.