Significant numbers of people in modern China can barely communicate to each other about complex ideas in Mandarin (several hundred million are 2nd language speakers or quasi 1st-language speakers).
Someone reading faulty pinyin and making a barely-comprehensible sounds might count as literacy in fluffy government surveys commissioned to show progress, but in reality being able to read pinyin does not mean someone can read in the way you or I understand it.
If you need to understand the meaning of something written in Chinese, you must see the Chinese character. Just because you can read the pinyin pronunciation doesn't mean you understand what's being said. Being able to produce sounds is not literacy - there's high amounts of ambiguity.
For example, reading
Shíshì shīshì Shī Shì, shì shī, shì shí shí shī. Shì shíshí shì shì shì shī. Shí shí, shì shí shī shì shì. Shì shí, shì Shī Shì shì shì. Shì shì shì shí shī, shì shǐ shì, shǐ shì shí shī shì shì. Shì shí shì shí shī shī, shì shí shì. Shíshì shī, Shì shǐ shì shì shí shì. Shíshì shì, Shì shǐ shì shí shì shí shī. Shí shí, shǐ shí shì shí shī shī, shí shí shí shī shī. Shì shì shì shì.
Does not tell you the actual the meaning of
石室詩士施氏，嗜獅，誓食十獅。 氏時時適市視獅。 十時，適十獅適市。 是時，適施氏適市。 氏視是十獅，恃矢勢，使是十獅逝世。 氏拾是十獅屍，適石室。 石室濕，氏使侍拭石室。 石室拭，氏始試食是十獅。 食時，始識是十獅屍，實十石獅屍。 試釋是事。
https://en.wikipedia.org/wiki/Lion-Eating_Poet_in_the_Stone_...
Another story entirely is the idea of adding "Simplified" Chinese characters. Now people who want to be seriously literate have to learn an additional set of characters. But I digress.
For another example of massaging statistics to show progress, notice how when a comparison of "China's educational progress!" is made to the West, a place like Shanghai - whose school district is among the best if not the best in the entire country - is often then compared to the national average of other countries as if one were somehow representative of the other.