Everyone knows the famous quote about lies and statistics, but trying to prove some economic data has a basis in truth is a real headache for some investors.
The main culprit is China.
Cited as the world’s powerhouse economy after years of outstanding GDP growth, which is now starting to slow, banks and fund managers are uneasy about the accuracy of some date coming out of government departments in Beijing.
GDP may certainly be growing, but by just how much is subject to conjecture.
The latest concern for analysts and economists was some serious drifting of figures in trade figures.
The ‘official’ set was quite rosy and upbeat, while those from private purchasing managers told a different story.
Suspect data
The formula for working out inflation in China is exasperating more than a few economists as well.
“China would certainly top the table if there was one for countries with suspect economic data,” said economist Stephen Green of Standard Chartered Bank.
Now Chinese premier Li Keqiang has thrown his two pennyworth into the mix.
Wikileaks diplomatic cables reveal that he expressed concerns about the nation’s economic data as far back as 2007 to the US ambassador.
He said he relied on only three figures – electricity consumption, the volume of cargo moved by train, and the level of credit.
“All other figures, especially GDP statistics, are for reference only,” he said. The inference added by the ambassador was that other figures were generated by the government.
At the time, Li Keqiang was a powerful provincial governor rising through party and political ranks.
Now, China is rated as the world’s second largest economy, toppling Japan and chasing the US for the number one spot.
No surprise
The question is, if and when China hits the top spot, can the data from Beijing be trusted?
Much of the Chinese culture is based on ‘face’ – and this could mean that the prospect of being the world’s richest economy could influence some statisticians and politicians to manipulate economic data.
Michael Pettis, a finance professor at Beijing University commented economists in China would not find Li Keqiang’s comments much of a surprise.
“I’ve been told this many times by government officials,” he said.
“The Chinese consider that their economic statistics have a hidden political meaning divined by other nations.”
Another point raised by economists is the speed in which data is collected and analysed in comparison with countries with smaller economies but a much better reputation for reliability on their figures – like many European countries.
