The Lady Doth Protest Too Much

Bloomberg: How China's Slowdown Is Worse Than You Think
One reason being touted to explain the gap is that China miscalculates the so-called GDP deflator, a broad measure of prices in the economy.

Capital Economics Ltd. argues that China's GDP deflator is underestimated in periods when import prices are falling less than producer prices, hence the boost to real GDP.

"It’s an esoteric point, but one with big implications: if the deflator is understated and nominal GDP growth is not, real GDP growth will be reported as higher than it really is," Mark Williams, Chief Asia economist at Capital Economics in London, who formerly advised the U.K. Treasury on China, said in a note.

In other words, China isn't netting out the changes in import prices when measuring overall price changes in the economy.
The CCP is having none of it.

Global Times: Accusations over GDP figures are frivolous
Working out the statistics for the Chinese economy is immensely challenging and it is hard to be absolutely accurate. No wonder the West has questions about the methodology. But different methods will not affect the authority of the NBS figures.

It is alluring to have economic statistics made on the government's will, which perhaps exists widely, but the Chinese government can resist this temptation. As it is illegal to fake NBS data, the assumption that the Chinese government can easily exert its will on the NBS actually misrepresents the government's operation model.

Despite the lowest GDP growth rate, the Chinese economy is not in its hardest times because the slowdown has greatly declined and the public has adapted to the current growth and even a lower rate. As faking a 7 percent figure takes more risk than releasing a lower but real one, China has no motives to forge the data.

The NBS has released numerous economic figures that may not look entirely ideal for China at the time. And today, the anti-corruption campaign has made all the officials more aware of the cost for any misdeed. It is hence groundless to suspect the NBS faked its statistics.

Since the number is 7 percent for two consecutive quarters, a few foreign media outlets were getting jittery. Accusations of crooked statistics are based on unprofessional questions, almost cheap complaints. The growth goal set by the government is around 7 percent, not 7 percent exactly. Since the third and fourth quarter's growth will probably beat it, the yearly data will likely be higher than 7 percent.
Coal, iron, oil and copper prices, along with real estate investment and electricity demands, to name a few data points, all point to much slower Chinese GDP growth.

I don't care what the official or unofficial GDP number is at this point because we have market prices. The more important question is do commodity prices reflect Chinese reality or not? Are these markets artificially propped up by financial demand and headed for collapse once the true state of China's economy is revealed, or is all the bad news priced in, even if the bad news is being hidden in the official numbers?

No comments:

Post a Comment