Thursday, January 15, 2009

The "reliability" of the Paper Dragon's Economic releases...

For anyone who reads this blog (search "Paper Dragon" and see previous articles), it should not be news that Economists are "questioning" China's wonderfully smooth growth records.

However, the financial media is now starting to ask questions about annual GDP growth figures that are (warning: slight exaggeration ahead) as smooth as Madoff returns.

All this "growth" and the Yuan does not appreciate. GDP and economic releases are and always have been an engineering problem (input X figures to achieve Y) for political regimes similar to China's system.

Economists at odds over China data reliability
By Geoff Dyer in Beijing
Published: January 14 2009 17:10 | Last updated: January 14 2009 17:10
Ask a Chinese official about the prospects for the economy this year and the response will be short and crisp – “8 per cent”. Some aim a touch higher, while a few others talk vaguely of risks. But none departs from the party line of uninterrupted high growth.

The target of 8 per cent is to assure Chinese citizens that the authorities have the situation firmly under control. Yet given the obvious and sharp slowdown in the economy in recent months, this confident prediction has reopened a debate about the credibility of Beijing’s growth statistics.

Since China’s ability to weather the international financial crisis will help determine the depth of the global recession, investors all over the world are asking whether they can rely on official statements about the performance of the economy.

Few economists doubt the underlying trend of high growth in recent decades in China, but many believe that the authorities play down the volatility of the economy – under-reporting growth in boom periods and over-reporting in the years when activity is weak.

The suspicion was underlined on Wednesday when the Chinese statistics bureau announced that growth in 2007 had been revised up to 13 per cent from 11.9 per cent – the second significant revision of the gross domestic product figures for that year. The reliability of statistics will be at the fore again next week when last year’s fourth quarter GDP figures are released, a period for which most indicators suggest there was a rapid slowdown.

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