China´s "man-made" growth statistics

AP reports that Asian stock markets were higher today after China said its economy grew in the second quarter of this year at its slowest pace since 2009 - which was in line with analysts expectations: 

China's gross domestic product expanded 7.6 percent in the April to June period from the same period a year earlier, down from 8.1 percent growth in the first quarter. China also reported that retail sales and factory output growth slowed in June

Equities in Asia had mostly fallen the previous few days amid speculation that China's growth may have slowed more than the consensus 7.6 percent forecast. Some analysts say expected interest rate cuts and fiscal stimulus spending by China should spur lending, investment and stronger economic growth in the second half of the year.

It appears, though, that those optimistic analysts have chosen to "forget" one important consideration -  realism. They should read this Bloomberg report: 

The figures that go into China’s gross domestic product are “man-made” and “for reference only,” Li Keqiang, then a regional Communist Party head, said in 2007.

The comments by Li, now a vice premier who’s expected to become premier next spring, were revealed in a diplomatic cable published by WikiLeaks in late 2010. Li’s remarks are especially relevant as China announced today that the economy expanded 7.6 percent last quarter from a year earlier, the slowest pace in three years.

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“Out of the black box comes a number, and that number doesn’t always line up with the other numbers,” says Andrew Batson, Beijing-based research director at macroeconomics consultant GK Dragonomics. “I wouldn’t be surprised if the GDP numbers this year are smoothed.”


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One legacy of the planned economy is that bureaucrats are given targets by the central government for everything from steel production to harvests and local GDP. These same officials traditionally have been promoted on their success in making their numbers.

“We have a saying in China: The cadres produce the data, and data produces the cadres,” said Jin Yongjin, a professor of statistics at Renmin University in Beijing.

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China still tends to treat its data gathering as a national secret, said Anne Stevenson-Yang, co-founder of Beijing-based J Capital Research, which analyzes equities. She cited the government’s refusal to release the weighting of goods tracked to compile its consumer price inflation index.

“Why would you ever lift the hood and show people how you do it?” Stevenson-Yang said. “That only reduces your ability to change numbers if you need to.”