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    China’s data ‘black box’ puzzles economists

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    For investors and policymakers worldwide, China’s quarterly economic data is a starting point in decoding the state of the world’s second-largest economy, but the latest figures contained a puzzle of their own.

    The country’s gross domestic product had grown 0.8 per cent in quarterly terms and 6.3 per cent year on year in the second quarter. The combined quarter-on-quarter growth over the previous four quarters, however, implied growth of 6.8 per cent.

    The mismatch arose because of official “seasonal adjustment” revisions by the country’s National Bureau of Statistics to the quarterly growth data in 2022. While such revisions are routinely made, economists say their effect has become larger in recent years.

    The lack of any detailed explanation on the process illustrates the difficulty in parsing China’s statistics at a time when the trajectory of its economy is seen as crucial for global growth.

    “That is where we are at the moment. How much has the economy grown in the second quarter, or [has it] not? That is a very important question for the markets and policymakers alike,” said Louis Kuijs, chief Asia economist at S&P Global. “Everyone is asking, ‘Is the Chinese economy stalling?’ It’s not easy to give a waterproof answer to that.”

    China has “certainly become more of a black box, and it’s just continuously moving in that trajectory”, said Shehzad Qazi, chief operating officer at China Beige Book, which publishes alternative economic indicators based on surveys of private companies in the country. The surveys have consistently implied weaker consumption than official figures show.

    Longstanding questions over how to interpret China’s economic indicators have a new sense of urgency in 2023, when official data has pointed to a loss of momentum following the lifting of Covid-19 restrictions. Policymakers are grappling with trade headwinds, weak consumption and a property cash crunch that has dragged on for almost two years.

    As in many other countries, China’s official data is typically seen as a “reference” that can be supplemented with other indicators, ranging from steel production to energy consumption. But while some new data series have been added, a wide range of other sources have been discontinued, often for no clear reason. It has also become more difficult to access supplementary and detailed information.

    “Disappearing series has been part of the challenge of analysing China in general, but accessing reliable data has definitely become harder in the past few years,” said Diana Choyleva, chief economist at forecasting company Enodo Economics in London.

    Questions around the reliability of domestic data flared up under the country’s zero-Covid policy. In the absence of clear information from local authorities, traffic data was used as an indicator of the severity of citywide lockdowns. The government stopped publishing death data after a nationwide outbreak began. This month the province of Zhejiang released and then deleted figures showing a sharp rise in cremations.

    Carlos Casanova, senior economist for Asia at UBP, said he had been unable to access detailed data on local government land sales on Wind, a data platform, since its use outside the country was restricted this year. “If I were to guess, I would say the reason for that is that pockets of stress have appeared . . . and they don’t want the market to get too carried away,” he said.

    Zhejiang province cremation data points to heavy pandemic toll

    With the government tightening control on information, including a new data law that in many cases requires multinationals to split off their domestic and external data, fewer people are providing data of any kind.

    “When China Beige Book first got started, we had a multitude of competitors,” said Qazi, who testified before a US congressional committee on China this month regarding the country’s economic data. “Much of that has now disappeared.”

    Another economist working for an international investor, who asked to remain anonymous, said there was currently “less frank dialogue” within China and there were “some data constraints that are tightening”. That said, he doubted the government would disguise a growth shock. “They are sensitive to accusations that the data aren’t quite reliable,” he said. “[The government] would just have to print the numbers.”

    A sense of slowing economic momentum in China has largely been based on the official data itself. The government has set a cautious growth target of 5 per cent, which Premier Li Qiang said in a speech last month the country was on course to achieve.

    Still, as China’s economy has proceeded to occupy a more significant position in a global context, there has been little corresponding development in its communications, analysts said.

    In its data release this week, the NBS said in a footnote that the revisions from its “seasonal adjustment model” related to month on month revisions for industrial enterprises, fixed asset investment and retail sales. It declined to comment further in response to a question on how the seasonal model works, and instead pointed to the release.

    “The national accounts data in China is still not produced in a way that we are familiar with in advanced economies,” said Kuijs. “In terms of accountability and transparency standards, you can go to [other countries] and ask them questions, and they are supposed to explain why did we change this.”

    Additional reporting by Andy Lin in Hong Kong



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