Tuesday, June 30, 2009

Why the debate persists over economic data from China

In the current economic environment, lot is said to depend on the economic performance of China and India. But, if the data from economies like China are not reliable, then it raises serious questions on the validity of macroeconomic policies. Why are official figures from China questioned in a manner, that is not usual for most major economies in the world, including India?

In June 2009, an Indian newspaper, DNA, reported on a study from Hong Kong, that acknowledged that in China today statistical accuracy is becoming a casualty of political considerations. Similar news have periodically appeared in news magazines across the world. Here is a sample.

Is China faking economic recovery?
Daily News and Analysis, Mumbai, 26 June 2009

"The Q1 6.1% GDP outturn is simply a lie," notes Albert Edwards, chief global strategist, Societe Generale. "It helps explain why the Chinese data is derided by so many economic commentators."

Commodity prices worldwide have surged in recent weeks on the hopes of a robust V-shaped revival in the Chinese economy. But Edwards, who had rightly called the Malaysian economic crisis of 1997 and the dotcom bust of 2000, believes that "to the extent that the renewed surge in commodities and the metals and mining sectors are based on the Chinese growth miracle, the markets are relying on a combination of hype, lies and wishful thinking."

Read the complete article here. 26 June 2009

Lies, damned lies, and China GDP statistics
Daily News and Analysis, Mumbai, on 13 June 2009

"In the research paper, titled "Revisions to China's GDP Data Following the 2004 Economic Census: More Questions Than Answers", Carsten A Holz, associate professor in the Social Sciences Division at the Hong Kong University of Science and Technology, says the findings of an economic census, on the basis of which China announced a benchmark upward revision of GDP statistics for the period 1993 to 2004, "raise severe questions about the capacity of China's National Bureau of Statistics (NBS) to accurately compile national data".

The census, carried out in 2004, had stumbled on a $270 billion slice of China's services sector economy - or an economy the size of Indonesia's - that had remained off the radar of government officials. It led China to announce a 16.8% increase in the size of its national economy. And although Holz, in an interview to DNA, emphasised that GDP revisions of that magnitude are not unique to China - indicatively, Italy's GDP was revised 18% upwards in 1997 - he conceded that there was "a lot of politics" surrounding China's GDP numbers.

This is, of course, not the first time that sceptical attention has been given to China's supernormal GDP growth of the past three decades, which has otherwise engaged everyone from envious policymakers in other developing economies to academicians looking for lessons from the world's biggest economic miracle."

Read the original article here. 13 June 2009

The Foreign Affairs magazine in 2004, had an article titled "The Myth Behind China's Miracle" by George Gilboy. The summary read, "Washington need not worry about China's economic boom, much less respond with protectionism. Although China controls more of the world's exports than ever before, its high-return high-tech industries are dominated by foreign companies. And Chinese firms will not displace them any time soon: Beijing's one-party politics have bred a timid business culture that prevents domestic firms from developing key technologies and keeps them dependent on the West."

Read the complete article here. July/August 2004

In January 1994, the New York Times carried a report that contrasted the different growth figures for China, for the 1980s and the early 1990s. The Economist magazine in London was estimating 13% growth rate in 1992, and even better in 1993. Around the same time, "World Bank figures show the Chinese economy growing by about 1 percent a year from 1982 to 1987. That pattern is confirmed by figures in the World Economic Factbook (1993) compiled by Euromonitor in London. China's annual real growth for 1989-1991 is reported in a more down-to-earth range of 1.7 to 4.8 percent." And the IMF estimated, "The real growth estimates are quite high, yet are significantly lower than those published in the IMF's own May 1993 report. For several years they even move in different directions."

The complete article may be read here.