Lies, lies and China`s damned GDP statistics - China perspectives | Moneyweb.com
Lies, lies and China's damned GDP statistics
ASIA CORRESPONDENT: China makes the headlines almost daily for its rip-roaring economic successes. If it is not the gross domestic product (GDP) of the country wowing international investors with its nearly double-digit growth trajectory, it is the staggering trade figures in various sectors.
New revelations that have emerged in the worldwide media - although not in China - through the controversial WikiLeaks website confirm we should be taking China's national statistics with a very large pinch of salt. The Wall Street Journal recounts how the country's new vice-premier Li Keqiang happily told US diplomats he is convinced GDP figures are man-made.
He was enjoying dinner, as the Communist Party secretary of Liaoning province, with the then US Ambassador Clark Randt in 2007 when he shared his thoughts on the flaws in the nation's data collection.
The cable, we are told, revealed that Li focused on three figures when evaluating his province's economy: 1) electricity consumption; 2) volume of rail cargo, believed to be fairly accurate as fees are charged for each unit of weight; and 3) amount of loans disbursed, which tends to be accurate given interest fees charged.
By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. Recounts The Wall Street Journal: "All other figures, especially GDP statistics, are 'for reference only,' he said smiling...GDP figures are 'man-made' and therefore unreliable," the cable paraphrases Mr Li as saying."
Li must have choked on his chao mian on hearing the news that his private dinner conversation was so easily recorded and subsequently shared with the wider world. And his bosses and comrades are unlikely to be pleased that he was so candid with outsiders, in particular Americans, about the veracity of China's glowing GPD figures - a huge source of national pride.
Nevertheless, Li's views could hardly have been surprising to Ambassador Clark Randt and friends. From a US information-gathering perspective, this was not espionage at its best.
The Americans need only have asked the average asset manager just about anywhere in the world, even in sleepy distant Africa, for his or her views on China's national data to be told something similar. A quick internet search might even have done the job, freeing up Randt for an evening at home with family or friends.
For many years, market watchers have eyed China's national statistics warily. Yet, ironically, this is a country in which many thousands of people must be employed in roles of collating, reporting and storing data.
There are many laws and regulations compelling organisations, from universities to commercial businesses, to report astonishing amounts of information to the authorities at various levels. With careers based on how good economic numbers look, the widely-held suspicion is that the figures are massaged for presentation to superiors, from the local level up.
Chinese citizens, meanwhile, are none-the-wiser about the WikiLeaks drama. Very little is being said about WikiLeaks in China, other than that its founder Julian Assange is up on sex charges. As no-one in China really knows who he is, the accusations are unlikely to be of interest. No doubt the Chinese government, which keeps a tight rein on editorial content, would like to discredit Assange and WikiLeaks to the wider population in order to diffuse the impact of any embarrassing or damaging information that might get out.
As the WikiLeaks storm developed in the world, Chinese authorities quickly moved to block the WikiLeaks internet site. It cannot be accessed legally from behind China's so-called Great Firewall.
Does it matter that the Chinese are oblivious to the brouhaha around the WikiLeaks revelations?
Maybe it is a good thing. After all, what would the tens of thousands of Chinese investors who have ploughed their savings into real estate and other sectors dependent on rosy GDP projections think if they hear that even their leaders believe the figures could be little more than an illusion?
Then there is inflation which, although rising, is being kept in check, we are assured. One suspects that ordinary citizens who buy their groceries daily would not be surprised that the nation's figures aren't accurate, though they could easily be annoyed if they believe they are being spun a yarn by their revered leaders about the extent of the problem.
Li is tipped to be the country's next economic leader after Premier Wen Jiabao steps down. Perhaps the WikiLeaks' exposé, which suggests he has a loose tongue at the dinner table, will spoil his chances of assuming that mantle.
On the other hand, if he does make it to that top job, it will be interesting to see which figures he uses when discussing his country's situation. And how he proposes to fix the country's data problems. After all, if you can't trust the statistics, you can't rely on them when making important decisions.
Also featuring in the WikiLeaks saga, meanwhile, is Xi Jinping, the man expected to be China's next president. What did the Americans find out about him? Wow! He is a fan of Hollywood movies.
Again, this is hardly astonishing information to elicit about anyone in China, let alone a prominent politician. Beijing's shopping streets and markets are awash with Hollywood movie DVDs, with pirate copies easily bought in shops just about anywhere in China in order to feed the national insatiable appetite for Hollywood movies.
It would have been more interesting to learn whether Xi is a man of principle who only buys the more expensive originals, considering that China's leaders have been trying to reassure their counterparts that they are committed to developing greater respect for intellectual property rights.
From a distance, and from behind the Great Firewall: What do the WikiLeaks revelations about China mean for the world? We should continue to exercise great caution and not rely on their statistics and national information when making investment and business decisions related to China. There is still much work for China to do to ensure its statistics have credibility.
Looking at the US, meanwhile, these revelations suggest that their diplomats should go back to spy school. What have they learnt about China's new leaders, really? The Americans laughed when an idiotic band of Russian spies was unearthed in their midst earlier this year. The WikiLeaks saga may be embarrassing for Xi and Li, but they are much more so for Ambassador Randt and pals.
Still, this is bound to provide fodder for a Hollywood movie. C'mon Sasha Cohen: how about jumping across the border from Kazakhstan for a "Borat does Beijing"?
