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Why Are We Still Paying Attention To Chinese Numbers?

A few years ago, economist Nouriel Roubini was explaining to a reporter why Chinese economic data couldn’t be trusted. He noted that it takes the US weeks and sometimes months to pull together and process the information necessary to produce a complex stat like GDP, and wondered how China, with its far bigger, less developed (and therefore harder to measure) population was able to do it in considerably less time. He concluded that they’re just making up their numbers.

Since then, a growing number of economists and analysts have come around to this point of view. They now largely dismiss China’s official reports, preferring instead to trust easily-verified things like shipping traffic and electricity consumption.

Yet China’s official releases still get treated by the markets as if they’re based on actual measurement rather than political calculation. The Q4 GDP report, published just minutes ago, is a case in point:

China’s economy grew 6.9 percent in 2015, a 25-year low

China’s economic growth rate slowed to a 25-year low of 6.9 percent in 2015, reigniting worries about the health of the world’s second-largest economy.

China’s economy grew 6.8 percent in the fourth quarter of 2015 from the same period last year, official data showed Tuesday.

Economic growth for the quarter was expected to come in at 6.8 percent on-year, down from the third quarter’s 6.9 percent, according to a Reuters poll, which also found economists expected full-year growth at 6.9 percent, down from 2014’s 7.3 percent.

“This is a good number,” Jahangir Aziz, head of emerging Asia economic research at JPMorgan, told CNBC’s Street Signs. “We’ve known for the last three years that the Chinese authorities are slowing down the economy. This economy is going to slow down,” he said.

“In August, last year there was almost a fear that the economy was in freefall. There was no policy support. I think all that has changed,” Aziz said.

There are a slew of concerns about the Chinese economy as it transitions from a manufacturing base to services: The country is hooked on debt, the shadow banking sector has imploded, the property market sometimes shows signs of a bubble and major industries are slowing.

Those concerns have driven, at least in part, a sharp drop in China’s stock markets recently. The Shanghai Composite has entered “bear within a bear” territory, falling more than 20 percent from its December high, as well as trading down more than 40 percent from its 52-week high set in June of last year.

Now, a couple of things. First, if they more-or-less fabricate their numbers, and this is what they’re willing to admit, then actual growth must be considerably lower. Second, as even the above article concedes, the stock market is tanking and the industrial side of the economy is shrinking. Services — whatever they are — must be rocking to produce a growing economy under those circumstances.

Combine these generally-accepted-as-fake numbers with the Chinese government’s recent display of almost random coercion (prosecuting short sellers, disappearing bookstore owners, imposing capital controls, intervening in equity markets) and a picture emerges of a country that’s not ready for prime time. China is big, yes, but it lacks the rule of law and stable institutions of a world power. And it seems not to understand markets, which should terrify everyone who hopes to avoid a global melt-down.

24 thoughts on "Why Are We Still Paying Attention To Chinese Numbers?"

  1. What an utter nerve roubini has,the next time the american administration or anything to do with it tells THE TRUTH will be the first.
    From job numbers to GDP ,From Pearl harbour to Syria every war created by america was on a pack of lies.Then there was 9/11 they butchered 3500 citizens in cold blood…….
    america and americans don’t point fingers as Three Fingers are Pointing BACK AT YOU

  2. So China’s numbers are as truthful as America’s numbers?
    Obama says “the economy is Grrrrrreat!”
    But shipping has crashed, China is NOT making junk for American consumers, and there is unprecedented BEGGING for Food Banks, Goodwill, Salvation Army, charities in general.

  3. Dreaming. Why don’t you count China production of infrastructure, massively out pacing our own. How many thousand miles of high speed rail do we have? Oh, right. Zero. You can talk Shit about Russia and China for another 20 years, ignore their (didn’t we send it to them?) production, net zero interest, no wars, the loans they make every day, etc., etc. OR, you can wake up to the fact they have past us by. We are dead in the water with corruption of every institution.

    They are coming into the 1st World. We are leaving it on the way to the 3rd World.

  4. 1 “everyone who hopes to avoid a global melt-down” should read this too because it is argued that the Saudis and not China that will pull the plug:


    2 If the West is, allegedly, governed by the rule of law, why did it invade Iraq based on lies of wmd and destroyed Libya with 120 cruise missiles, just to get rid of Qaddafi?

    3 If the US economic numbers are not phony, why is there a need for John Williams to set up an electronic newsletter service, called “Shadow Government Statistics”, that exposes and analyzes flaws in current U.S. government economic data?

  5. So what about China ! The USA figure may take more time but they’re still full on BS .
    The USA is manipulating ALL markets – lets talk about that for a change.

    1. Mr Clander, my man why do you hate the US so? Primarily England, but also Europe , and the US have brought about conditions that will enable a world civilization. They have greatly increased the std of living of the common man, eliminated slavery, emancipation of women. The scientific advancement is beyond belief. Spiritual,, at a low ebb now. Plus war is at a low ebb as well. The middle east is the only worthwhile war (for the merchants of death – arms dealers). Without Syria, we have world peace. Those achievements far outweigh fiat money machinations. Greed is bad but covetousness is the worst. I really think you would hate whomever is on top.

  6. China is not as fake-azz as the United States anymore….. “It takes months for us to put together numbers” because we have to slapback, baffle, and bulls#!t our way through the markets to keep ours from tanking.

    Donald Trump is right – there’s a lot of currency manipulation going on and the greatest of it is right here in the United States where we print money and dump it in banks all over the world and then US taxpayers are expected to pick up the tab!!
    This article makes China look like a gold standard and the U.S. in the crapper.

    The leadership in this country have absolutely no right to call China a currency manipulator when we print more money than the rest of the world combined – and expect everybody else to eat it.

  7. It is my understanding that most numbers out of China are not to be relied on, but not all. For example, I read that electricity production and consumption are supposed to be reliable. And those numbers are showing a growth rate in 2015 of a little over 1%. So I doubt the Chinese economy grew 7% last year.

    1. You are making an arithmetical error whereby you are neglecting what base each percentage is derived from and the overall aggregate level.

      Just because X increases by 5% , doesn’t mean that Y must increase by 5%
      There are several features to consider.
      What is the current aggregate level of X versus Y ?
      There may be less than 100% correlation between the two data series and the correlation may be dynamic.

  8. ” China is big, yes, but it lacks the rule of law and stable institutions of a world power. ” It is problematic to talk about “the rule of law” being absent in China while writing from acountry where, among other things, police seize property absent trial and finding of guilt, where citizens are sometimes assassinated by flying robots, likewise with no trial, where existing law is flouted, as in the case of the GM bailout,
    or where non- violent protesters can be penned, like animals within razor-wire enclosures (with no water or portapotties) dubbed “Free Speech Zones.” Where a recent President described the Constitution as a “G-D piece of paper.”

  9. Phantom GDP
    In 2013, our “servants” adjusted the gross investment number, adding research and development (R&D) spending which shouldn’t be included in the GDP because it’s not an
    investment worth real dollars. They also included art, music, film royalties,
    books and theatre. 30 years ago government rigged inflation numbers by changing the fixed items used to compute the inflation rate to lower the rate. A pound of beef has doubled in price, heck substitute chicken which costs $1.05 that way we can show a 5% increase rather than a 100% change. By offsetting inflation, GDP is made to appear higher than what it really is. Does anyone remember when you could buy a VW for under 2,000 or a cheap house for 20,000? What does a cheap car cost today, 15,000? What does a cheap house cost today, 150,000? Yet the government will tell you how much better your wages are. What a joke.

    Oath breakers now use dormant, non-productive activities in the production numbers so people reading books are equivalent to new factories being built. Instead of simply including the Apple iPads for example, they will also include the R&D to make them. Instead of including pension payouts, they include “the promise to pay” in their new
    accounting scheme.

    Other gimmicks to manipulate GDP include commissions, legal bills and expenditures on real estate transactions as “investment” even though they are obviously not contributing to the GDP and do not translate into real production. Various intangibles are being added to the supposedly real numbers.

    The Financial Times reported that starting from July 2013, U.S. GDP would become 3% bigger due to a change in statistics. But this is imaginary GDP. Even with all
    with all the changes and lies, growth is still only 2.3% and last quarter it was -.1%. By removing 3% phantom GDP, and calculating inflation as it was in the 80s, real growth has
    been negative for years indicating the US is in a depression. Yet government tells us the economy is growing.

  10. Not to put too fine a point on it but do you trust US GDP numbers? Unemployment numbers? Inflation numbers? Which country, if they posted totally true and accepted numbers, would have the larger impact on global markets? The biggest economy or the second biggest economy? Just saying…. 😉

    1. you said it Bill Johns….a whole lot a “massaging” of data in USA to report what they feel they need to create the perception they want the public to have. Psychology and mood are judged to be more important than true data. “lie to me, tell me it’ll be all right and I write more checks, borrow more money”

    2. Along the same line, do you trust gold miners, silver miners, or oil companies? They never talk about earnings. The latest scam is they talk about AISC or AIGC, all in silver (or gold) cost. Please. Do I look that stupid. Tell me how much profit you made according to GAAP accounting standards. Is that too much to ask? Apparently, lol.

    3. They only believe the numbers when the president is a Republican and when it’s a Democrat the numbers are all messaged according to CNBC and on the weekends meet the Republicans talk shows.

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