China’s Economic Data
The Taste of Mystery Meat
China’s economy is a lot to wrap a mind around. It’s huge, the world’s second-largest. It’s changing fast. “Transparency first” is not exactly China’s national motto. Everyone from investors to central bankers and executives nevertheless have plenty of compelling reasons to strain to understand it. To do so they have to parse official output statistics so notoriously enigmatic that even China’s Premier, Li Keqiang, once said he prefers not to rely on them. That was putting the situation politely. Bill Gross, the renowned bond-fund manager, was blunter: He called China “the mystery meat of emerging-market countries.”
China’s National Bureau of Statistics cobbles together data from many sources whose reliability is difficult to ascertain. The results can be eccentric. For example, the bureau reported gross domestic product for 2015 of $10.4 trillion. But the sum of the GDP reported by China’s 31 provinces was about 6.9 percent more. The discrepancy may be explainable — by double counting or by provincial officials inflating their figures because they are judged on the strength of local GDP growth — but the truth is elusive. At least the gap is getting smaller, perhaps indicating improved data quality. Then there are dubious indicators of economic performance like the national jobless rate. It only covers urban residents who bother to register as unemployed and ignores more than 270 million migrant workers who frequently change jobs or get fired. Li said in 2007 that he judged economic performance (of Liaoning province, where he was party secretary at the time) through electricity consumption, rail cargo volume and loan growth. That approach would be partial at best now given how services have expanded to make up more than half of the economy. Some analysts say China may even be undercounting GDP due to the difficulties measuring the services sector. Meantime, Liaoning government officials have admitted fabricating fiscal revenue data in order to advance their careers.
The problem isn’t just politically motivated distortion of the sort that was routine under Mao Zedong. Because China’s statistics were designed to measure a Soviet-style planned economy, they do a reasonable job assessing output from centralized industries such as steel and automobiles. China hasn’t been able to keep up with the data requirements of the country’s modern, consumer-driven economy and lags in collecting information about service businesses such as small restaurants and karaoke bars. It’s making some efforts, such as releasing a new quarterly report on cultural industries. The government also published a nationwide audit of local government debt in 2013 to address concerns about borrowing that local officials have relied on. No one really knows how much debt is at risk of default. Officially, the ratio of non-performing loans is 1.75 percent — some economists see that number more than 10 times higher.
It’s tricky to get a clear picture of what’s happening in any fast-changing country. China’s economy is transforming from one that relies on exports and industrial production to one that seeks to satisfy the demands of its 1.4 billion consumers. So when it comes to economic data, interested observers have to pick and choose. Economists often resort to anecdotes, logic or their own measures. For example, Bank of America judges Chinese industrial performance by means of an index composed of electricity and steel production, government revenue, exports and imports, and car sales. Skepticism rises when strong industrial output coincides with weak electricity use, or when China reports growth in overseas shipments while fellow Asian exporters like South Korea or Taiwan report declines. Data may not be reliable even if it comes straight from the top. What the government called a 4 trillion-yuan stimulus package launched in late 2008 proved far bigger than the headline number suggested. Back to meats: Like Bill Gross, the Credit Suisse economist Tao Dong has an informal processed-pork indicator. In February 2014, he noted that slower sausage sales during the weeklong Lunar New Year festival may mean China’s economic downturn was worse than it looked.
The Reference Shelf
- A 2013 paper by researchers at the U.S-China Economic and Security Review Commission looked at the reliability of Chinese economic data.
- A 2004 paper by the Hong Kong University social scientist Carsten A. Holz provides a rich narrative of the transformation of China’s statistics system.
- A Bloomberg TV report shows that skepticism about China’s economic data dates to the 1930s.
- “Myth-Busting China’s Numbers,” a book by Matthew Crabbe.
- “Understanding China's Economic Indicators,” a book by Tom Orlik, Bloomberg's chief Asia economist.
- Bloomberg News on China's GDP numbers: “How the Data Is Sliced and What's New This Time.”
- The Center for Strategic & International Studies: An Independent Look at China's Economic Size
First published April 9, 2014
To contact the writer of this QuickTake:
Xiaoqing Pi in Beijing at email@example.com
To contact the editor responsible for this QuickTake:
Grant Clark at firstname.lastname@example.org