China’s economic data might be the motherlode of fool’s gold
‘Cherry-picking approach’ casts a shadow over Beijing’s official numbers from the National Bureau of Statistics
Sifting through China’s economic data is as back-breaking as panning for gold. Not everything you find that glistens is valuable.
At times, it resembles shiny iron pyrite especially after Beijing has juiced up the numbers.
Independent verification of official figures is practically non-existent as the ruling Communist Party controls the country’s institutions.
“Chinese government statistics are unreliable since Beijing publishes sanitized data and many transactions may be close to worthless,” Derek Scissors, an economist at the American Enterprise Institute think tank, said before the Covid-19 crisis.
His comments simply echo what many analysts have always known about the roulette-style numbers game in the world’s second-largest economy.
Back in February, Leland Miller, the chief executive of the influential advisory company China Beige Book, questioned the veracity of the figures rolled out by the National Bureau of Statistics.
“The Chinese published GDP numbers are absolute garbage. It’s certainly the consensus that [they] are unreliable,” he said.
Since then, China’s economy has powered ahead as it recovers from the coronavirus pandemic. At least, that is the line being peddled by the Party.
Official statistics earlier this month showed that factory activity expanded at the fastest pace in more than three years in November. A private Caixin/Markit PMI survey went even further, pointing to a decade-high jump in manufacturing, as well as an accelerating services sector.
The trend continued when it came to trade. November was another record-breaking month with a surplus of US$75.4 billion, triggered by a 38% surge in medical equipment and a nearly 62% rise in electronic appliances.
“Many Covid-related purchases won’t happen again . . . This will weigh on China’s export performance relative to global demand, after the market share gains in 2020,” Louis Kuijs, the head of Asia Economics at Oxford Economics, said in a note.
Moreover, certain state-owned enterprises and state-sponsored companies have benefited substantially from the worldwide battle to combat Covid-19. They have been inundated with orders for ventilators and personal protective equipment, as well as electronic goods.
But other mega groups that help form the backbone of government data have struggled. Also, small- and medium-sized companies are simply ignored despite generating 60% of GDP or gross domestic product.
“The core statistical problem is the sample’s changing characteristics and size. The NBS [National Bureau of Statistics] has a longstanding practice of only surveying firms above a minimum annual revenue. Any firm that falls below the threshold is dropped and its results removed from past data,” Shehzad Qazi, the managing director of China Beige Book, said.
“This cherry-picking approach, which can produce trillions of yuan worth of adjustments, invalidates any claims of random, representative sampling,” he wrote in a commentary for Asia Times Financial in October.
Welcome to the Klondike of the stats world, where fake gold is just beneath the surface.