Podcast Host: Hasti Rabiei
Guest: Hamzeh Arabzadeh

Hasti: Recently, The Economist has published multiple articles on increasing censorship, manipulation, and a growing lack of transparency in China’s economic data. The reports discuss everything from withholding key macroeconomic statistics and restricting Chinese companies from sharing financial information abroad to silencing critical economists and blocking independent research on certain economic issues. Even foreign researchers trying to study China’s economy face obstacles. What’s going on? Is this really something new for China?

Hamzeh: The Chinese government has always been authoritarian in the political sphere. Suppressing dissent and controlling political opposition isn’t new, although many argue that these tendencies have intensified under Xi Jinping. But what’s changed in recent years is that censorship, data manipulation, and restrictions on the flow of information have expanded into the economic domain. That’s a major shift from the trajectory of the past few decades.

Since the late 1990s, China embraced economic liberalization. One aspect of this was opening up to global trade and integrating into the world economy—joining global supply chains, expanding imports and exports, allowing foreign direct investment, and even permitting international investors to participate in Chinese stock markets. Another was the rise of private enterprises and a move toward a more market-driven economy.

Opening up the economy naturally brought greater data transparency. Investors needed access to reliable macroeconomic data and company financials to make informed decisions. Unlike the Soviet Union—where economic statistics were shrouded in secrecy—China’s rapid economic growth was accompanied by improved data availability and accuracy.

Of course, when we talk about transparency in China, we’re not comparing it to Western democracies. Chinese official statistics have always had their flaws. Foreign economists studying China have long criticized the opacity of data collection methods. But the trend over the past decades was one of improvement—more detailed and comprehensive statistics, better methodologies, and greater accessibility. What we’re seeing now is a reversal of that progress.

Hasti: Can you give some concrete examples of how this data manipulation and restriction on economic information is playing out?

Hamzeh: Take China’s latest capital account data. The discrepancies are striking.

A country’s capital account balance can be calculated in two ways—either by tracking capital inflows and outflows directly or by subtracting the current account balance from total trade flows. In theory, the two measures should match, since a country’s capital and current accounts always sum to zero. But in China’s latest reported data, there’s a $230 billion discrepancy between the official capital account figures and what should result from the trade balance calculations. That’s an enormous gap, suggesting something is being misreported or deliberately obscured.

Another example is the stock market. On August 19, China’s exchanges stopped publishing daily data on foreign capital flows—a metric that had been publicly available. Instead, they announced that this data would now only be disclosed on a quarterly basis. For investors, who rely on real-time data, this was a major blow.

Or consider economic growth figures. The government claims GDP growth has fully recovered to pre-COVID levels. But this narrative doesn’t align with what businesses on the ground are experiencing. The real estate sector is in a prolonged slump, the services industry is stagnating, infrastructure investment is declining—none of this suggests an economy in full recovery.

Beyond official statistics, China has also intensified restrictions on corporate financial disclosures. Many datasets that were once easily accessible online have vanished. Foreign businesspeople visiting China post-pandemic report that arranging meetings with officials has become far more difficult, and that many routine business processes now require special approval. Even researchers and foreign journalists have reported similar difficulties in accessing data and speaking with sources.

Hasti: What’s driving this surge in economic data censorship and manipulation?

Hamzeh: As I mentioned earlier, China’s post-COVID economic recovery has been far weaker than expected. The housing sector is in crisis, spillover effects have hit services, and U.S.-led restrictions on investment in China have caused a steep drop in foreign capital inflows.

Just to give you some numbers: in Q2 2023, China’s net foreign direct investment (FDI) turned negative, reaching -$14 billion—the worst figure in the country’s history. Investment inflows in the first seven months of the year dropped by 30% compared to the same period in 2022. The last time China saw such a sharp decline was during the 2008–2009 financial crisis.

With economic conditions deteriorating, the government is understandably reluctant to project an image of weakness. In a politically closed system like China’s, where the ruling party exercises near-total control, there is both the ability and the incentive to manipulate economic data.

In more open political systems, a government cannot simply fabricate a positive economic narrative. Independent institutions, universities, and media outlets would scrutinize and challenge official claims. But in China, where the state can suppress dissent and restrict the flow of information, it becomes possible to create a parallel reality—one in which the economy appears stronger than it actually is.

The problem is that this approach can backfire. When governments manipulate economic data, markets become less efficient, leading to poor investment decisions and worsening economic conditions. This, in turn, forces even greater censorship and manipulation—a vicious cycle where bad economic conditions lead to more data distortion, which then further undermines economic confidence.

Hasti: Let’s explore that further. How exactly does restricting economic data harm market efficiency?

Hamzeh: From the perspective of foreign investors, unreliable official statistics and restrictions on corporate disclosures make China a far riskier place to do business. If foreign firms lack trust in the accuracy of Chinese economic data, they hesitate to invest. This weakens China’s ability to attract foreign capital and maintain its role in global trade networks.

The same applies to domestic businesses. Economic decision-making relies on accurate data, price signals, and market trends. When key economic indicators are distorted or inaccessible, firms misallocate resources, making inefficient investment decisions. Over time, this reduces overall productivity and economic growth.

Hasti: This reminds me of Friedrich Hayek’s arguments against centralized economic planning—his idea that market economies function best when price signals and information flow freely. How relevant is that debate to what’s happening in China?

Hamzeh: Very relevant. During the Cold War, figures like Hayek and Karl Popper argued that economic liberalization requires political liberalization. Hayek’s concept of “spontaneous order” suggested that markets function best when decision-makers—whether businesses or consumers—have unfiltered access to economic information.

The collapse of the Soviet Union was, in part, the failure of a centrally planned economy that lacked real price signals and transparent data. China, learning from this, adopted a hybrid model starting in the late 1990s—political authoritarianism alongside economic liberalization.

For decades, the government tolerated relatively free-flowing economic and technological information, allowing firms to integrate with global markets. Chinese companies listing on the New York Stock Exchange, for example, had to disclose their financials publicly.

But now, The Economist argues that this economic openness is being reversed. National security concerns—and perhaps more accurately, the security of the ruling party—are taking precedence over economic pragmatism.

Yet, as we discussed earlier, China needs efficiency and productivity growth now more than ever. With a shrinking workforce and rising geopolitical tensions limiting access to Western technology, optimizing resource allocation is critical. But efficient resource allocation requires transparency.

When resources are scarce, misallocating capital, labor, or subsidies becomes far more costly. If investments are made based on flawed economic data, or if firms cannot properly assess risks and returns, productivity stagnates—at the worst possible moment for China.

Hasti: What are the key takeaways for Iran?

Hamzeh: Every point we discussed applies even more strongly to Iran. If China—an economy deeply integrated into global markets—faces major challenges due to declining economic transparency, imagine how much more damaging a lack of transparency is for a country like Iran, where foreign investment is already scarce.

Iran’s economic data quality is far worse than China’s. If Iran ever hopes to attract international business, transparency must improve. Otherwise, domestic firms will continue struggling with inefficient decision-making, and foreign investors will remain hesitant to engage.

A final point is the relationship between political centralization and economic freedom. China’s recent trajectory highlights the dangers of an authoritarian government interfering in economic data—a reality that is all too familiar in Iran.