Streetwise Professor

May 5, 2016

If You Believe the Official Reason for Cutting Off Chinese Economic Statistics, I Have a Great Wall to Sell You

Filed under: China,Commodities,Economics,Energy,Politics — The Professor @ 9:33 pm

Since October of last year, China’s National Bureau of Statistics has not published detailed data on metals markets. And it’s not just metals:

Data on oil products such as liquefied petroleum gas, naphtha and fuel oil have been withdrawn. So too have regional figures for coal, steel and electricity output.

 

The ostensible reason is that statistics bureau personnel were selling data for personal gain.

If you believe that, I will sell you a large wall. It’s so big they say you can see it from space! Only one like it! I sell it to you for a song.

“Anti-corruption” is the cover/pretext that the Chinese government now uses to eliminate those who have fallen from political favor. The most likely explanation for the “anti-corruption” drive aimed at economic statistics agencies is not to eliminate politically inconvenient people: it is to eliminate politically inconvenient data.

The fraudulence of Chinese official economic statistics is well known. One of the challenges of creating false official statistics for aggregate numbers like GDP growth is making it consistent with data on specific industries or sectors. The divergence between GDP growth and electricity production, for instance, has often been remarked upon.

How to solve this problem? Stop producing the underlying sector/industry/product specific data. How to do that without giving away the real reason? Use the all-purpose excuse: fighting corruption.

This has an air of plausibility: after all, corruption is rife in China. But this really doesn’t pass the smell test, especially given the timing: note that the data embargo started when concerns about the Chinese economy became acute at the end of last year.

The Chinese are desperate to maintain the illusion of 6.7 percent growth, quarter in, quarter out. Maintaining that illusion has become harder and harder as questioning of the consistency of various data sources has become more insistent. Shutting off the flow of sector/industry/product data is a brute force way of dealing with that problem.

This is another signal of the real state of the Chinese economy. The government wouldn’t have jacked up the stimulus unless the true state of affairs was far more dire than official statistics suggest. The government wouldn’t be suppressing data from the primary goods sectors unless it was also giving the lie to the official line.

Bottom line: question everything relating to the economy in China right now. Be especially skeptical about anything done under the banner of fighting corruption. That banner should be a red flag warning that the Chinese Communist Party is trying to suppress inconvenient people, or inconvenient truths. If they say it’s about corruption, it’s really about something else.

 

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5 Comments »

  1. “…for a song” ???

    Nice one but surely it should be “…for a ming”. Historical accuracy and similar dynastic claptrap …

    Comment by Simple Simon — May 6, 2016 @ 5:47 am

  2. Or perhaps a wang.

    Should Vlad stop now?

    Comment by Vlad — May 7, 2016 @ 9:03 am

  3. I am afraid the Great Wall is already in demand by those who bought a bridge between NY county and Kings County – and there are a lot of bidders based on the latest from our business press.

    As far as propaganda goes I am waiting for the wreckers and saboteurs to show up any moment al la Venezuela.

    Comment by Sotos — May 8, 2016 @ 12:47 pm

  4. @Sotos-Very clever. Yes, some people just need to add all of the world’s great monuments to their portfolios.

    It is incredible to me that so many people drink Panda Kool Aid. IMO you have to have no clue about how the price system and markets work, and about economic statistics (GDP in particular) to believe that China is not a train wreck waiting to happen.

    “Corrupt bureaucrats/party officials/army officers” are the Chinese equivalent of wreckers and saboteurs. That sells better to modern western liberals.

    The ProfessorComment by The Professor — May 9, 2016 @ 9:43 pm

  5. The train wreck is almost pulling into the station as scheduled. It didn’t take too much vision even during the China-hype peak in 2008-9 to see that things couldn’t continue along the track they were on for more than about another ten years. I don’t think any country has reported investment near 50% of GDP that many years in a row without some sort of crash, and the surge in dirigisme and loan subsidies to protect state enterprises has not been very persuasive. The sad thing is that there a lot of non-state-owned (though heavily state-influenced) Chinese companies that have made a lot of progress over the years. The really sad thing is that it looks like Xi may be getting ready to play the anti-foreigner card with a vengeance to stave off CCP unpopularity when the downturn comes. Could be interesting times for the U.S. Navy.

    Comment by srp — May 11, 2016 @ 4:27 pm

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