China clamping down on fraudulent use of statistics and data

The Chinese government is to update laws governing the collection and use of statistics by accountants, economists and other agencies in a bid to improve data authenticity and accuracy and tackle fraud.

The revision will mean those who manipulate statistics for gain – such as falsifying data and financial reports – will face heavier penalties including fines of up to 10 times any illegal income generated.

China’s top legislature, the Standing Committee of the National People’s Congress (NPC), has opened a review of the proposed amendments, with revisions and new clauses drafted to increase fines for violations.

“In recent years, statistical work has faced challenges, like persistent data fabrication, ineffective supervision and low non-compliance cost for offenders,” said National Bureau of Statistics (NBS) director Kang Yi.

The 14 amendments to the law governing statistics would ensure local authorities, statistical agencies and department heads must not request or guide their staff, subordinates or those subject to statistical investigations to submit false data.

The amendments also stipulate that offenders will be punished, including being publicly named and discredited.

The revised statistics law would also increase fines up to 500,000 yuan (£55,000) for businesses and other entities that refuse to provide or delay data submissions, according to the People’s Daily newspaper.

Beijing has been eager to clamp down on local officials inflating or manipulating key economic statistics, including gross domestic product and debt.

The NBS said that reliable data from genuine businesses is essential to gauge the state of the world’s second-largest economy.

In 2023, the NBS inspected several central and western provinces, including Guizhou, with the bureau warning that statistical crime was still rife.

In October, the NPC Standing Committee also expressed concern over quality of data generated by small and medium-sized financial institutions, saying that the numbers did not “reflect the actual situation”.

China’s Accounting Law is also set to be updated, with Beijing vowing to crack down on financial crimes, including falsifying accounts.

“Accounting supervision is weak when misconduct is difficult to pursue and offenders are let go lightly,” Liao Min, China’s finance vice-minister, said in a statement to the legislature. “Accounting information is usually distorted and financial fraud and a lack of internal audits among listed companies is still rampant.”

The 17 amendments to the Accounting Law are also set to impose heavier fines, including a maximum penalty of two million yuan for falsifying financial reports, while offenders with illegal incomes of more than 200,000 yuan may be fined up to 10 times the amount of their illegal gains.

Aligning with the provisions of China’s Securities Law, the revised accounting provisions would raise fines for a range of offences, including when businesses fail to set up account books as mandated by law and those who operate unofficial account books.

To strengthen deterrence, fines for businesses faking records and financial reports, as well as instigators of accounting crimes, would also be higher, although the specific details have not been disclosed.

 

Opinions sought on rules regulating non-bank payment institutions

Also on the regulation front, the People’s Bank of China is asking the public for opinions on the rules regulating the non-bank payment institutions, as a part of efforts to enhance their supervision and management.

The consultation document details the regulations for the supervision and administration of non-bank payment institutions, which were issued by the State Council last December.

It offers further clarification on key concepts, such as major shareholders and actual controllers, as outlined in the regulations, and details administrative licensing procedures for the non-bank payment institutions.

Through the move, the central bank hopes to bolster transparency foster greater efficiency in payment institutions. In protecting the legal rights and interests of payment users, it specifies requirements regarding the retention period of user data and transaction records, as well as adjustments to fees.

In recent years, China has seen substantial growth in its non-bank payment industry. Data shows that over one trillion transactions are made in the country via non-bank payment institutions annually, with a total value of around 400 trillion yuan £45 trillion).