China’s data ‘black box’ puzzles economists

Get complimentary updates on the Chinese economy at no cost

You will receive a daily email called myFT Daily Digest that will summarize the most recent news regarding the Chinese economy every morning.

For global investors and policymakers, the quarterly economic figures from China serve as a key element in understanding the condition of the world's second-largest economy. However, the most recent data presented a mystery of its own.

The economy of the nation saw an increase of 0.8% in its gross domestic product in the second quarter compared to the previous quarter. Moreover, there was a growth of 6.3% when compared to the same quarter of the previous year. However, considering the growth over the past four quarters, the combined quarter-on-quarter growth indicated a growth rate of 6.8%.

The discrepancy occurred due to the National Bureau of Statistics' alterations to the quarterly growth data in 2022, which are classified as "seasonal adjustment" revisions. Although these revisions are regularly conducted, economists argue that their impact has grown more significant in recent times.

The absence of a comprehensive clarification regarding the procedure showcases the challenge in deciphering China's data during a period when the course of its economy is deemed essential for worldwide progress.

"That is our current situation. How much has the economy expanded in the second quarter, or has it not? This question holds significant significance for both the markets and policymakers," stated Louis Kuijs, S&P Global's chief Asia economist. "Everyone is inquiring, 'Is the Chinese economy slowing down?' Providing a definitive answer to that is quite challenging."

According to Shehzad Qazi, the COO of China Beige Book, China is becoming increasingly mysterious and its current path is leading further in that direction. China Beige Book conducts surveys with private companies in the country and publishes alternative economic indicators. These indicators consistently suggest that consumption is not as strong as the official figures suggest.

You are currently viewing a still image of an engaging visual display. This is probably because your internet connection is unavailable or JavaScript has been deactivated in your web browser.

China's economic indicators have been a subject of ongoing uncertainty in 2023, especially as recent official data has shown a decline in momentum after the easing of Covid-19 restrictions. Decision-makers are now faced with challenges related to trade, low consumer spending, and a prolonged property market crisis that has persisted for nearly two years.

Similar to numerous other nations, China's official information is commonly regarded as a "guide" that can be complemented by additional indicators, encompassing activities such as steel manufacturing and energy usage. Nonetheless, despite the inclusion of some fresh data series, a diverse array of alternative sources have been terminated, frequently without any apparent justification. Furthermore, obtaining supplementary and comprehensive information has become increasingly challenging.

"Vanishing collection has been an integral aspect of the difficulty in scrutinizing China as a whole, but acquiring trustworthy information has undeniably grown more challenging in recent years," stated Diana Choyleva, the primary economist at the prediction firm Enodo Economics in London.

Doubts about the trustworthiness of national data arose due to the zero-Covid strategy employed by the country. With the local authorities failing to provide transparent information, the intensity of citywide lockdowns was gauged through traffic data. As the entire nation faced a widespread outbreak, the government decided to halt the publication of death statistics. Recently, the province of Zhejiang disclosed and subsequently removed data that revealed a significant surge in cremations.

According to Carlos Casanova, an expert economist focusing on Asia at UBP, he expressed that this year he has faced difficulties in obtaining comprehensive information pertaining to land sales by local governments on the platform called Wind. This inconvenience arose due to restrictions on the platform's usage outside the country. Casanova speculates that this restriction may have been implemented to prevent excessive enthusiasm in the market because certain areas have experienced stressful situations.

As the government enhances its grip on information, implementing a fresh legislation that often demands multinational corporations to separate their domestic and international data, a reduced number of individuals are sharing any form of data.

"When China Beige Book initially launched, we faced numerous rivals," stated Qazi, who recently provided testimony to a US congressional committee on China focusing on the nation's economic information. "Many of those contenders have since vanished."

A different economist employed by a global investor, who preferred not to disclose their identity, stated that China currently lacks open and transparent communication. Moreover, they mentioned that there are limitations on available data that are becoming more strict. However, the economist expressed skepticism regarding the government manipulating economic growth figures. They emphasized that the government is cautious about facing criticism concerning unreliable data and would simply release the numbers instead.

There is a feeling of decreased economic progress in China, predominantly relying on the provided information. The authorities have established a careful objective of 5 percent growth, as mentioned by Premier Li Qiang during a recent speech, expressing that the nation is on track to fulfill this target.

However, according to analysts, despite China's economic growth on the global stage, its communications sector has not seen significant progress.

In the recent data release, the NBS mentioned in a sidenote that the adjustments made by their "seasonal adjustment model" pertain to changes in industrial enterprises, fixed asset investment, and retail sales on a monthly basis. When asked for more information on how the seasonal model operates, the NBS chose not to elaborate and directed attention to the provided release instead.

Kuijs stated that the manner in which China presents its national accounts data differs from that which we are accustomed to in developed nations. When it comes to standards of accountability and transparency, one can approach other countries and seek explanations for any changes made in their data.

Further information provided by Andy Lin based in Hong Kong.