Gross domestic product (GDP), as an indicator that gauges economic growth, has become the most important focus of concern for the country's economists and government departments.

It is safe to say that currently GDP growth is the exclusive consideration of many local governments. This finds expression in the fact that the difference between the national GDP and the sum of local GDP figures is becoming all the larger.

Technical and institutional factors are behind the widening gap.

Technically, it is quite normal for discrepancies to occur in statistics. Even in developed countries, statistical figures undergo repeated revisions. So, the Chinese statistical institutions and undertakings need some time to adapt to established international practices and norms in this regard, taking into account that we have just begun to bring our statistical work more in line with international practice.

The Chinese statistical system did not start to integrate with the internationally adopted economic calculating system until the 1990s. Groundwork in this respect largely still needs to be promoted.

More importantly, the Chinese economy is undergoing rapid and dramatic changes in terms of total volume and economic sectors. The sharp swing from planned economy to market economy poses a serious challenge even to mature statistical systems, let alone the defective Chinese statistical institutions. Despite all this, the country's statistical system and methods are being improved steadily, which wins appreciation and recognition from the international statistical establishment.

But the gaping difference between the national GDP and the sum of local GDP figures defies technical factors, particularly after taking into account that the central and local statistical authorities adopt much the same calculating approaches.

As a matter of fact, it is the "GDP-above-everything-else" system of calculation that has caused the distortion of GDP figures.

GDP is a vitally important economic indicator, but it is by no means omnipotent. Because GDP ignores many factors relevant to the well-being of humankind, the growth of GDP does not necessarily mean that the national wealth increased simultaneously.

For example, the destruction of wealth may be included in the gross domestic product. By tearing down a building, we are adding some value to the GDP because the labor cost of the demolition workers is included in calculations for the GDP. In addition, explosives are bought, and their value is also included in the calculation.

In much the same way, diseases, crimes and national disasters can also push up GDP figures while bringing down the quality of social life. Also, the GDP does not mirror the damages wrought by economic growth to natural resources and the environment. The GDP figures cannot reflect the structure of income, either.

Overall, the GDP concept is exclusively growth-orientated, to the neglect of clean air and water, a healthy and secure society, people's enjoying after-work hours and other respects closely associated to people's lives.

Taking all this into account, it is still necessary that the economy develop at a proper pace.

In addition, the slowdown of economic growth does no good to social stability, in view that economic development is closely connected to employment. So the speed of the economic advance remains the focus of macroeconomic decisions, though we discourage the "GDP cult." And statistical materials and data constitute the foundation for scientific decision-making. The importance of accurate GDP calculations to the whole country's development could never be exaggerated.

By contrast, the inflated GDP figures are bound to color judgments regarding the economy, ultimately at the expense of people's well-being.

Now, therefore, methodology becomes extremely important, with respect to redressing statistical wrongs and improving statistical techniques.

First and foremost, maintaining the independence of statistical institutions and their work constitutes the crux of the matter in redressing the inaccuracy in statistics. The State Council decided in March 2005 that statistical teams at various levels be organized and put under the authority of the National Bureau of Statistics along a vertical line from the top to grass roots.

The bureau also intends to get involved in directly calculating and examining the economic operations at various local levels. All this can help, to a certain extent, redress statistical inaccuracy in localities.

Second, it is important to extend the GDP indicators to cover wider areas. This means that the quality of economic development and its efficiency should be monitored; that the concepts of national wealth and "green GDP" be introduced and that people's excessive concern for GDP be watered down and their GDP complex be dissolved.

In this regard, the city of Shenzhen has conducted some useful probes. Indicators of social results, ecological results and human development are introduced to the GDP calculation package, which used to be exclusively geared to economic aspect. Sustainable development, instead of numerical economics, tops the city government's agenda.

Finally, and most important of all, the system for evaluating officials' performance and work records should be overhauled.

By established practice, GDP growth in a locality is used to gauge the performance of local officials and, therefore, constitutes a vitally important factor affecting their position on the hierarchical ladder. To make matters worse, it is up to local governments to oversee the calculation of local GDP.

Local governments, under such heavy pressure, most likely have the motivation to stretch GDP figures to their own ends. Indeed, high GDP growth becomes the most useful tool in the competition between local governments and between individual officials. In other words, competition within the government system itself tends to artificially shove up GDP figures.

In view of all this, merely improving statistical techniques is not enough, nor is the introduction of a few more individual indicators. Institutional reform of the statistical system is called for, instead, and the statistical law needs to be amended. Those who cook up false statistical figures should be held accountable for the wrongdoing and be disciplined or punished by law.

It is high time we got rid of the GDP complex. This is the prerequisite for rolling back statistical inaccuracy.

The author is a senior economist with the State Information Center.

(China Daily September 5, 2006)