In an unguarded moment, a rising Chinese official named Li Keqiang told the U.S. ambassador that China`s official GDP figures were "man-made". That is, he effectively admitted they were concocted by Chinese officials to fit the optimistic story about the state of the economy that the government was communicating to its citizens. Li Keqiang also explained that in trying to understand the state of the Chinese economy he used three indicators that were easy to track and weren`t part of the Chinese national account: railway shipments, electricity consumption, and loans disbursed by banks.

1. Why would an economic downturn cause problems for Chinese companies that borrowed

heavily?

2. How do these three statistics that Li Keqiang cited fit into three different ways to calculate

GDP?

3. What business problems might China`s untrustworthy numbers create?