How to fudge data - China style

[trackwhack]

The Official Chinese PMI for March was 53.1. HSBC on the other hand said - 48.3. An article with a subtle conclusion.


China's economic direction puzzles investors

The health of China's manufacturing sector, which is the source of most of the world's T-shirts, iPads and fertiliser, is a crucial indicator for anyone wanting a snapshot of the state of the global economy.
As investors pore over the statistics, the picture has been complicated by two competing indicators of production released by the Chinese government and HSBC that tell almost the opposite story.

In March, China's purchasing managers' index surged to 53.1 – its highest level in a year – while HSBC's measure fell to 48.3. A reading over 50 means factory activity increased, while one below points to contraction.
So is the Chinese manufacturing sector expanding at its fastest pace in a year, or is it contracting at an accelerated rate? That is what everyone, from Australian mining companies to Chinese executives, is trying to answer.
"The economy is just sucking wind right now," says one senior Chinese auto industry executive, who asked not to be named because he did not want to damage relations with powerful government officials by talking to the foreign press. "It's clear there's a slowdown under way, but whether that gets much worse or not depends on three things – Europe, the [domestic] real estate market and whether the government boosts infrastructure investment again."
China's manufacturing sector is less export-orientated than it was at the onset of the financial crisis in 2008, but it remains heavily dependent on trade. Many economists see a recession in Europe, its single largest export market, as a key risk to Chinese growth this year.
Trade data for March are set for release on Tuesday, but in the first two months Chinese exports to Europe fell 1 per cent from the same period last year, after growing 7 per cent in December. Overall exports rose just 6.9 per cent from a year earlier, down from 13.4 per cent growth in December.
Investment in real estate construction directly accounted for about 13 per cent of China's economic growth last year. But thanks in large part to strict government purchase restrictions, transactions and prices are sliding and new construction is expected to follow.
"The property market is the most important part of the economy, it affects almost every other industry," said the owner of one of China's largest cotton processing companies, who also asked not to be named. "If nobody's building or buying apartments, then they aren't buying curtains or sheets and that really hurts my business."
During the global financial crisis in 2008, as the Chinese real estate market wobbled and exports plummeted, Beijing launched a huge economic stimulus package, channelling trillions of renminbi worth of bank loans into infrastructure projects to boost growth. New roads, airports, railways and apartments sprang up across the country and the manufacturing sector quickly rebounded from its slump.
Some economists believe Beijing is likely to repeat that trick this year, albeit on a smaller scale, by loosening monetary policy and stimulating growth through new infrastructure projects. Largely in expectation of this, many analysts have recently upgraded their gross domestic product growth forecasts, with the consensus falling somewhere between 8 and 9 per cent for the year, compared with 9.2 per cent in 2011.
On the other hand, the government's official GDP growth target has been lowered to 7.5 per cent for the year, the first time it has been less than 8 per cent in seven years.
China is expected to release first-quarter GDP figures on Friday, with expectations that the world's second-largest economy grew 8.4 per cent in the first three months compared with a year ago.
But some economists with the ear of top policy makers say Beijing does not have the will or the capacity to stimulate the economy again.
"According to the Chinese economic model the government can only boost growth by easing monetary policy and pumping up infrastructure spending but there is no way to do that this year," says Yuan Gangming, an influential economist at Tsinghua University. "All the bullets were spent a couple of years ago, infrastructure investment has already peaked and monetary policy is already loose."
Many analysts agree that on this occasion HSBC's PMI is probably closer to the mark than the official reading. There appear to be problems with how the government's PMI is adjusted for seasonal variations. And weak data in everything from industrial company profits to power usage in the first two months of the year support the more bearish picture presented by HSBC.
That is bad news for anyone looking for evidence that the world's workshop is revving up again and that the global economy is on the road to real recovery.

http://www.ft.com/intl/cms/s/0/f90783f6-821a-11e1-9242-00144feab49a.html

 

[Armand2REP]

If you look on the doom and gloom thread, you will see all three factors are getting worse.

 

[huaxia rox]

i cant believe FT would ever rasie a question like that....chinas PMI is centered at state owned and some very big companies while HSBCs samples r mainly export orieanted companies and some private owned companies which may suffer more becoz of the EU dept crisis.....anyway i think the 2 r both reflecting different aepects of prcs economy at the same time....

 

[Yusuf]

China falsifying economic statistics to disguise true depth of troubles: Economists

HONG KONG: As the Chinese economy continues to sputter, prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of the troubles.

Record-setting mountains of excess coal have accumulated at the country's biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said.

Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country's economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.

Indeed, officials in some cities and provinces are also overstating economic output, corporate revenue, corporate profits and tax receipts, the corporate executives and economists said. The officials do so by urging businesses to keep separate sets of books, showing improving business results and tax payments that do not exist.

The executives and economists roughly estimated that the effect of the inaccurate statistics was to falsely inflate a variety of economic indicators by 1 or 2 percentage points. That may be enough to make very bad economic news look merely bad. The executives and economists requested anonymity for fear of jeopardizing their relationship with the Chinese authorities, on whom they depend for data and business deals.

The National Bureau of Statistics, the government agency in Beijing that compiles most of the country's economic statistics, denied that economic data had been overstated."This is not rooted in evidence," an agency spokeswoman said.

Some still express confidence in the official statistics. Mark Mobius, the executive chairman of Templeton Emerging Markets Group, cited the reported electricity figures when he expressed skepticism that the Chinese economy had real difficulties. "I don't think the economic activity is that bad - just look at the electricity production," he said.

But an economist with ties to the agency said that officials had begun making inquiries after detecting signs that electricity numbers may have been overstated.

Questions about the quality and accuracy of Chinese economic data are longstanding, but the concerns now being raised are unusual. This year is the first time since 1989 that a sharp economic slowdown has coincided with the once-a-decade changeover in the country's top leadership.

Officials at all levels of government are under pressure to report good economic results to Beijing as they wait for promotions, demotions and transfers to cascade down from Beijing. So narrower and seemingly more obscure measures of economic activity are being falsified, according to the executives and economists.

"The government officials don't want to see the negative," so they tell power managers to report usage declines as zero change, said a chief executive in the power sector.

Another top corporate executive in China with access to electricity grid data from two provinces in east-central China that are centers of heavy industry, Shandong and Jiangsu, said that electricity consumption in both provinces had dropped more than 10 percent in May from a year earlier. Electricity consumption has also fallen in parts of western China. Yet, the economist with ties to the statistical agency said that cities and provinces across the country had reported flat or only slightly rising electricity consumption.

Rohan Kendall, senior analyst for Asian coal at Wood Mackenzie, the global energy consulting firm, said coal stockpiled at Qinhuangdao port reached 9.5 million tons this month, as coal arrives on trains faster than needed by power plants in southern China. That surpasses the previous record of 9.3 million tons, set in November 2008, near the bottom of the global financial downturn.

The next three largest coal storage areas in China - in Tianjin, Caofeidian and Lianyungang - are also at record levels, an executive in China said.

Many Chinese economic indicators already show a slowdown this spring, with fixed-asset investment growing at its weakest pace in May since 2001. The annual growth rate for industrial production has edged below 10 percent, while electricity generation was up only 3.2 percent in May from a year earlier and up only 1.5 per cent in April.

The question is whether the actual slowdown is even worse. Skewed government data would help explain why prices for commodities like oil, coal and copper fell heavily this spring even though official Chinese statistics show a more modest deceleration in economic activity.

Manipulation of official statistics would also provide a clue why some wholesalers of consumer goods and construction materials say sales are now as dismal as in early 2009.

Keeping accurate statistics for internal use by policy makers while releasing less grim figures to the public and financial markets may also help explain why China's central bank suddenly and unexpectedly cut interest rates earlier this month.

Studies by Goldman Sachs and other institutions over the years have strongly suggested that Chinese statisticians smooth out the quarterly growth figures, underreporting growth during boom years and overstating growth during economic downturns.

And Chinese officials have raised questions in the past about the reliability of Chinese economic statistics. An American diplomatic cable released by WikiLeaks shows that Li Keqiang, widely expected to become premier of China this autumn, said in 2007 that he regarded China's broad measures of economic growth as " 'man-made' and therefore unreliable."

Mr. Li told an American diplomat that he looked instead to three indicators that he described as less likely to be fudged: electricity consumption, volume of rail cargo and the disbursement of bank loans.

Jonathan Sinton, a China energy specialist at the International Energy Agency, said he had not heard of false data in China's electricity sector, and he doubted it would be feasible at the five biggest electricity generation companies that together produce half of China's electricity.

"If there is a problem, it is going to be located in the smaller producers," he said, cautioning that even these producers would eventually have to submit accurate information to reconcile fuel, electricity and financial accounts.

Stephen Green, a China economist at Standard Chartered Bank, said that the Chinese economy was still likely to recover this autumn as extra bank lending started to stimulate spending.

But a survey of Chinese manufacturing purchasing managers, released on Thursday by HSBC and Markit and conducted independently of the government, gave the second-gloomiest reading for their businesses since March 2009. Only November of last year was worse, when many small and medium-size businesses faced a brief but severe credit squeeze

http://m.timesofindia.com/PDATOI/articleshow/14358403.cms

 

[Ray]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Ah well!

China will be China.

China shall shine, come hail, rain or high waters.

 

[G90]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

When could the west economists finally get tired of being alway utterly wrong on about their forecast on China economy?

Given their track record, their forecast are even less creditable than a broken clock, ROFL

 

[Armand2REP]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

China's electricity consumption is flat or negative, sounds about right to the rest of the economy based on HSBC PMI that says manufacturing is in recession...

 

[no smoking]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Ah well!

China will be China.

China shall shine, come hail, rain or high waters.

There is no chance that China could come up something like "india shining".

 

[Armand2REP]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Bad Loans are Here

 

[Armand2REP]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

40-50% of Wind Power Projects Left Idle

Experts warn on China's "reckless" wind power expansion - Companies & Industries - Morning Whistle - Latest chinese economic, financial, business, political and society news

 

[G90]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Bad Loans are Here

Am I the only guy here who find its rather entertaining and ironic when a frenchmen, who is about to join the elite group of PIGGS, jumping up and down with joy over issues like debt,or bad loan of banks :ROFL:

 

[no smoking]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Am I the only guy here who find its rather entertaining and ironic when a frenchmen, who is about to join the elite group of PIGGS, jumping up and down with joy over issues like debt,or bad loan of banks :ROFL:

He is always like this. If you can't ignore him, then just get used to it.

 

[Armand2REP]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Am I the only guy here who find its rather entertaining and ironic when a frenchmen, who is about to join the elite group of PIGGS, jumping up and down with joy over issues like debt,or bad loan of banks :ROFL:

Must be since France is nowhere near PIGGS with 2/3 AAA ratings and an economy out of recession.... unlike China.

 

[Ray]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

There is no chance that China could come up something like "india shining".

NO they won't.

They are not too well versed with the English Language.

 

[Ray]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

 

[huaxia rox]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

There is no chance that China could come up something like "india shining".

only if u care to start a thread called 'current economy of india (no 'doom' word needed coz truth iteslf carries weight)' in this forum then u can put at least 10 articles per day to show how shinning india is........

 

[no smoking]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

only if u care to start a thread called 'current economy of india (no 'doom' word needed coz truth iteslf carries weight)' in this forum then u can put at least 10 articles per day to show how shinning india is........

Well, that is the soft power of india, isn't it?

 

[G90]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Must be since France is nowhere near PIGGS with 2/3 AAA ratings and an economy out of recession.... unlike China.

It takes alot of drugs to write sentence like above ROFL

 

[trackwhack]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

There is no chance that China could come up something like "india shining".

Just like there is no chance that India could come up with something like "peaceful rise" ?

 

[nimo_cn]

Re: China falsifying economic statistics to disguise true depth of troubles: Economis

Apparently, one "Doom and Gloom of China's Economy" is not enough, we definitely need more.