There are several issues with economic data, as I have mentioned before. These issues have to be considered when analyzing economic data and being financially literate requires an understanding of the problems with economic data. The political pressures for manipulating the data to appear good exist is every country. The practical difference is the other forces that push for data that is more accurate (businesses, investors, economists… need accurate data to succeed) and practices that have been adopted to provide accurate data.
Foreign Policy magazine takes a look at problems in How China Cooks Its Books
But local and provincial governmental officials are the ones who actually fiddle with the numbers. They retain considerable autonomy and power, and have a self-interested reason to manipulate economic statistics. When they reach or exceed the central government’s economic goals, they get rewarded with better jobs or more money. “The higher [their] GDP [figures], the higher the chance will be for local officials to get promoted,” explained Liu.
Last October, Vice Premier Li Keqiang said in a speech after inspecting China’s Statistics Bureau, “China’s foundation for statistics is still very weak, and the quality of statistics is to be further improved” — a brutally harsh assessment coming from a top state official.
China’s economy grew at an annualized 6.1 percent rate in the first quarter, and 7.9 percent in the second. Yet electricity usage, a key indicator in industrial growth and a harder metric to manipulate, declined 2.2 percent in the first six months of the year. How could an economy largely dependent on manufacturing grow while its industrial sector shrank? It couldn’t; the numbers don’t add up
My guess is China’s data is highly questionable and still China’s economy is fairly strong. But because the data is so questionable it does make the risks of being wrong on that guess fairly high. Even the US government data is flawed: it is no surprise China’s data is less reliable.
Related: Is China’s Recovery for Real? – Misuse of Statistics – Mania in Financial Markets – Manufacturing Employment Data – 1979 to 2007 – The Long-Term USA Federal Budget Outlook –
Data Shows Subprime Mortgages Were Failing Years Before the Crisis Hit