When I read this article last week in the New York Times explaining how the Chinese government manipulates its economic data, my reaction was one of surprise. However this wasn’t because because it was a huge revelation to me that the Chinese government manipulates such data, I had just assumed all along that they did. Rather my surprise came from the realization that there are many who do not share my same skepticism about the government numbers.
In a country whose government is completely obsessed with controlling the flow of information by, among other methods, completely blocking websites such as YouTube and Facebook, employing an automatic filter on search engine results, and hiring a teams of people to comb through and selectively delete comments on the country’s Twitter equivalents (Twitter itself is also completely blocked), does it come as any surprise that the flow of the holy grail of information, the one set of numbers that gives the Communist Party its very legitimacy, would be left to chance?
That’s not to say though that these data are necessarily manipulated, or “smoothed”, upward. I’m sure that as a part of the smoothing, in the better years the data were adjusted downward to provide a bit of sanity to the explosive growth that was indeed occurring. Local bureaucrats live and die by the economic data they report, so just as it is dangerous to have numbers that are too low (according to the standards set by Beijing), it is also potentially dangerous to report numbers, albeit true, that fall above Beijing’s expectations- the equivalent of flying Icarus flying too close to the sun.
And then on top of that, the data are even more unreliable because there is a huge, unreported, cash economy. In many cases when a business quotes a price for goods or services, it actually quoted two prices: one price if an official receipt (“Fa Piao”) is needed, and a different (lower) price for good old cash.
So then my question is, given the total mess that is the ‘official’ economic data, why do people continue to put faith in it? If the government says in January that growth in the year will be 9%, is there any reason to doubt that come December, the reported growth will in fact be 9%, plus or minus (usually plus) a bit? The government wants and needs complete control, as its destiny is inextricably linked to the well-being of the economy.
Perhaps I’m in the minority with my skepticism, but am I the only one that thinks the reported Chinese economic data is complete hogwash?
Umm no its years old that they use all kinds of tactics to inflate their economic numbers. It wasn't even that hidden, I heard a bunch of stories. From guys that invested in fraudulent companies there with fake balance sheets, all the way to the government building ghost cities; no it's not a surprise to anyone outside of the most removed members of society.
i wonder which country does more # fudghing: china or argentina...
on a side note, mcdonalds finally raised the price of the bigmac in argentina, up 25% I believe, which would be fitting as it would match the true inflation rate, maybe the government isn't subsidizing it anymore http://baexpats.org/expat-life/20362-how-big-mac-can-hide-inflation.html http://www.economist.com/blogs/dailychart/2011/01/big_mac_index
China is probably underestimating GDP numbers lol
In other news, government propaganda occurs in all countries. Lets not be so naive to assume that the US isn't guilty of any shady dealings with its own economic numbers. Who really believes the CPI?
I recommend the following primer: http://online.wsj.com/article/SB100014240531119043535045765658939242940…
From the article:
"But local-level GDP data, especially for more backward provinces, remains deeply unreliable. In the Wikileaks scandal that broke at the end of 2010, it was revealed that even China's premier-in-waiting, Li Keqiang, had little faith in the provincial GDP data. Speaking to the U.S. ambassador in 2007, when he was still party secretary of Liaoning province, Li said that the data was 'man-made' and, therefore, unreliable. To keep a handle on the growth rate of the Liaoning economy, he relied on tracking electricity consumption, rail cargo volume, and bank lending.
But lying local officials aren't always the problem with China's official growth data, and the NBS doesn't always err on the upside. As a second episode in the troubled history of China's GDP calculation shows, the sheer size and complexity of the Chinese economy can also defeat the statisticians, and the official numbers can understate the true size of the economy."
I am in China. Right now there is a lot of talk about the slowdown, but you wouldn't believe it was happening if pollution was any indicator. The bigger question for me is if the actual stated Investment portion of GDP will provide the returns it should. Its not that in some cases major hubs don't have a lot to gain from metro expansion, tunnels, highways, faster internet, but just that the lifespan on a lot of major projects seems questionable. Most are plagued by corruption and planned on unrealistic timelines where failures in quality control become inevitable. Anyway, this is not news to anyone.
No surprise that the NY Times will use any opportunity they get to publish negative news about China. While China is probably manipulating economic data, I agree that this is not new news.
The NY Times recycles and repackages again and again the same opinions and the same negative reporting on China. I have been reading in the NYTimes that China is on the edge of catastrophic failure since I began reading newspapers more than a decade ago. in that time, hundreds of millions of Chinese have continued to build themselves out of poverty and the economy continues to rocket ahead. When growth is fast, NYTimes says that China is overheating and therefor on the brink of a crash. When growth is slower because the PRC govt is instituting macro policy to guide things along more smoothly, NYTimes says that the slower growth is a sign of the failing economy.
Is the PRC govt pretty fucked up in some ways? Yes, but they get shit done a hell of a lot better than most govts in the world (and vastly better than democatic govts of developing countries (indonesia, india, etc.)
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