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21-01-15, 15:50
“Ten to 15 years ago, to create 1 million jobs, China needed 1.4% GDP growth,” said Markus Rodlauer, the chief of the IMF’s China mission, in an interview with the official Xinhua News Agency released Friday. “Five to 10 years ago, it needed 1%. Now it only needed 0.8% GDP growth.”

According to China’s Ministry of Human Resources and Social Security, the country added 2.73 million jobs in 2013. If the IMF formula is correct, China grew 2.2% last year.

So what did the IMF forecast for Chinese growth for 2013? On October 8 of that year, the organization issued a prediction of 7.5%.

Obviously something is wrong at the IMF as it is not possible to reconcile 7.5%, the forecast, with 2.2%, the result of applying Rodlauer’s formula. And to make matters worse, the IMF cannot argue that the 2.73 million figure is an anomaly. Low job creation is not a new phenomenon in China: the Human Resources Ministry reported that the number of jobs created in 2012 was 2.84 million.

What is going on? China, like many countries, supplies data on a confidential basis to the IMF so that it can conduct what are known as Article IV Consultations. The data China supplied to that organization may not have been the same as the figures the National Bureau of Statistics released to the public. If so, it means the IMF had been staying silent as Beijing issued different—and undoubtedly inaccurate—statistics to the public.

Some justify the IMF’s silence on the commonsense belief that Chinese officials would not work with the organization if it were to release Beijing’s real numbers. Yet whether the IMF is right or wrong to receive numbers under such conditions—I believe it is almost always wrong for multilateral organizations to not challenge member states for deception—Rodlauer’s formula has exposed an impossible-to-explain discrepancy.

So how fast is China growing? The IMF formula, despite its stark result, is not out of line with others of its type. Premier Li Keqiang, for example, last year said that each percentage point of GDP growth created 1.4 million jobs. That means China grew 2.0% in 2013. The Morgan Stanley formula—1.6 million to 1.7 million jobs for each point of growth—suggests growth of 1.7% or 1.6%. To put all these numbers in context, the NBS has reported that China’s gross domestic product grew 7.7% in 2013.

So far, virtually every analyst has ignored indications of low single-digit growth. Yet the IMF should not as it certainly has a special obligation to the global community of candor. Either its forecasts are way off base or Rodlauer made a horrible mistake, and we have a right to know which is true.

My sense—and I admit that I’m very much in the minority when it comes to China’s GDP—is that Rodlauer is correct. Yet whether I am right or wrong, now that its China chief has put the organization’s credibility at risk on a significant matter, someone at the IMF needs to explain.

Follow me on Twitter @GordonGChang and on Forbes

Author’s note: On September 8, I sent the draft of this article to the IMF seeking comment. As of the time of posting, I had not received any response from the organization.