China’s Economic Data

The Taste of Mystery Meat

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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.”

The Situation

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 a 2013 GDP of $9.4 trillion. But the sum of the GDP reported by China’s 31 provinces that year is about $1 trillion 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. China’s export growth numbers in early 2013 were inflated too. The customs administration acknowledged the problem but didn’t revise the data. In September, officials said a probe uncovered fraudulent trade documents worth almost $10 billion — including many irregularities by companies using the port of Qingdao — and that the problem distorted government statistics. 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 200 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.

Source: National Bureau of Statistics of China
Source: National Bureau of Statistics of China

The Background

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. The People’s Bank of China created an aggregate financing indicator, which includes traditional bank loans and seeks to measure activity in China’s $6 trillion shadow banking industry. 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.

The Argument

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, Morgan Stanley 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, he noted that slower sausage sales during the weeklong Lunar New Year festival may mean China’s economic downturn has been worse than expected.

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 scheduled for release in May 2014, recommends ways to understand and use China’s statistics.

First Published April 9, 2014

To contact Bloomberg News staff on this QuickTake:

Zhou Xin in Beijing at xzhou68@bloomberg.net

To contact the editors responsible for this QuickTake:

Scott Lanman at slanman@bloomberg.net

Jonathan I. Landman at jlandman4@bloomberg.net