I think the easiest answer is that China over-estimated its population. It helped them on two fronts - it gave them a larger population than India (so bragging rights for being the world's most populated country) and it probably helped people in the CCP scam more money. Inflating the population of an area, getting extra benefits or cash from the govt, stealing the amount that's actually surplus. I'm not entirely sure how their local governments are set up, or how many layers of govt there are in any given area, but I can see a potential for scamming.