In the literature, it is generally asserted that official Chinese statistics underestimate
inflation and overstate real output growth (Maddison, 19984; Young, 2000). In fact, China’s
official statistics are mainly based on the reports of local officials. Especially in rural areas,
many collective enterprises are believed to report equal rates for both nominal and real
changes in output (Woo, 2000). Besides, it is often claimed that political pressure to meet
central policy growth targets might push local governments into exaggerating output