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Thursday, 25 June 2009
Data-miners doubt whether China’s recovery is for real
There is an old joke about proud parents: they all insist their children are above average. You could equally well make it about men. Every man alive is convinced he is a better than average driver.
Data-miners doubt whether China’s recovery is for real
Tom Holland 25 June 2009
There is an old joke about proud parents: they all insist their children are above average. You could equally well make it about men. Every man alive is convinced he is a better than average driver.
Both, of course, are arithmetical absurdities. But the joke is not just on parents or the male sex. It also applies to the mainland economic data.
Consider last year, when every single one of China’s 31 provinces, with the sole exception of Shanxi, reported growth rates for their gross domestic product above the national average.
This phenomenon is not hard to explain. Officials are assessed according to the pace of local economic development and have a powerful incentive to exaggerate growth rates when reporting economic data to the central government.
But although they are easily enough explained, this and other quirks of mainland data gathering and reporting sow significant doubts in the minds of many observers about the credibility of economic statistics published by Beijing.
As a result, a few diehard sceptics continue to question whether the economic rebound widely believed to be gathering steam on the mainland is for real.
As evidence, they point to data like Japan’s exports to China, which were released yesterday showing a 30 per cent fall over the year to May and little movement compared with April’s number. If China was really growing at the 7 per cent many economists are forecasting for the second quarter, then its imports from Japan would look a lot less anaemic, argue the doubters.
Similarly, others have cast doubt on whether recent steep declines in electricity production and corporate profits are really consistent with an official inflation-adjusted growth rate of 6.1 per cent for the first quarter of this year.
These misgivings are reinforced by the way in which official figures for gross domestic product are published. The number for the first quarter came out just 16 days after the end of March. In contrast, statisticians in the United States, with a vastly more sophisticated data-gathering machine, took 29 days to produce their initial estimate.
To make things worse, Beijing only releases year-on-year figures for inflation-adjusted growth rather than quarter-on-quarter numbers. And although it does publish absolute amounts for quarterly GDP, these are not adjusted for inflation.
These and other misgivings have fostered a cottage industry of economists attempting either to deconstruct the official numbers to come up with more reliable figures, or to develop proxies for the true economic growth rate.
The results they produce are seldom pretty. Analysts at Morgan Stanley long ago warned that the official 6.8 per cent year-on-year figure for GDP growth in the fourth quarter of last year was wildly misleading. They estimated that in quarter-on-quarter terms, growth had ground to a halt - a suspicion confirmed this week by a National Bureau of Statistics official who admitted the quarterly growth rate was actually just 0.1 per cent.
Meanwhile, analysts at Lombard Street Research have derived an alternative figure for real first-quarter growth by applying a derived deflator to the published notional output.
Instead of the official 6.1 per cent growth rate, they estimated that real year-on-growth was flat in the first quarter.
And analysts at Capital Economics have calculated their own proxy for GDP growth using data for domestic freight volumes, electricity output, construction activity, passenger transport numbers and sea-port traffic.
They conclude that although the official figure for the second quarter will almost certainly be significantly higher, actual GDP growth will be no more than 6 per cent.
Far from being above average, for the mainland that would be distinctly sub-par.
2 comments:
Data-miners doubt whether China’s recovery is for real
Tom Holland
25 June 2009
There is an old joke about proud parents: they all insist their children are above average. You could equally well make it about men. Every man alive is convinced he is a better than average driver.
Both, of course, are arithmetical absurdities. But the joke is not just on parents or the male sex. It also applies to the mainland economic data.
Consider last year, when every single one of China’s 31 provinces, with the sole exception of Shanxi, reported growth rates for their gross domestic product above the national average.
This phenomenon is not hard to explain. Officials are assessed according to the pace of local economic development and have a powerful incentive to exaggerate growth rates when reporting economic data to the central government.
But although they are easily enough explained, this and other quirks of mainland data gathering and reporting sow significant doubts in the minds of many observers about the credibility of economic statistics published by Beijing.
As a result, a few diehard sceptics continue to question whether the economic rebound widely believed to be gathering steam on the mainland is for real.
As evidence, they point to data like Japan’s exports to China, which were released yesterday showing a 30 per cent fall over the year to May and little movement compared with April’s number. If China was really growing at the 7 per cent many economists are forecasting for the second quarter, then its imports from Japan would look a lot less anaemic, argue the doubters.
Similarly, others have cast doubt on whether recent steep declines in electricity production and corporate profits are really consistent with an official inflation-adjusted growth rate of 6.1 per cent for the first quarter of this year.
These misgivings are reinforced by the way in which official figures for gross domestic product are published. The number for the first quarter came out just 16 days after the end of March. In contrast, statisticians in the United States, with a vastly more sophisticated data-gathering machine, took 29 days to produce their initial estimate.
To make things worse, Beijing only releases year-on-year figures for inflation-adjusted growth rather than quarter-on-quarter numbers. And although it does publish absolute amounts for quarterly GDP, these are not adjusted for inflation.
These and other misgivings have fostered a cottage industry of economists attempting either to deconstruct the official numbers to come up with more reliable figures, or to develop proxies for the true economic growth rate.
The results they produce are seldom pretty. Analysts at Morgan Stanley long ago warned that the official 6.8 per cent year-on-year figure for GDP growth in the fourth quarter of last year was wildly misleading. They estimated that in quarter-on-quarter terms, growth had ground to a halt - a suspicion confirmed this week by a National Bureau of Statistics official who admitted the quarterly growth rate was actually just 0.1 per cent.
Meanwhile, analysts at Lombard Street Research have derived an alternative figure for real first-quarter growth by applying a derived deflator to the published notional output.
Instead of the official 6.1 per cent growth rate, they estimated that real year-on-growth was flat in the first quarter.
And analysts at Capital Economics have calculated their own proxy for GDP growth using data for domestic freight volumes, electricity output, construction activity, passenger transport numbers and sea-port traffic.
They conclude that although the official figure for the second quarter will almost certainly be significantly higher, actual GDP growth will be no more than 6 per cent.
Far from being above average, for the mainland that would be distinctly sub-par.
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