Tuesday, April 30, 2013

Is China fudging shamelessly?

Genuine concerns on manipulation of data cast serious doubts over the way the Chinese economy is progressing. Considering how this has serious implications for the world’s second largest economy, and consequently for the world at large, China must work together with international experts to sort this out at the earliest

Pundits call it ‘the’ case in point when it comes to superlative achievement in a holistic sense. Optimists insist that it is the next centre of power for the world. Pessimists call it the beginning of an end. China, in the past one decade, has quadrupled its GDP from $1.2 trillion to $7.3 trillion and ultimately became the world’s second largest economy – that too amidst the global economic slowdown (read this issue’s cover story on the Chinese story, which is a joint research between Cornell-IIPM Think Tank-B&E)!

Nobody can dispute China’s unparalleled progress, but the mysteries inherent in some of their official statistics are clearly discomfiting. Paradoxically, for this 2nd fastest growing economy, the overall electricity consumption is showing a reverse trend. It doesn’t require rocket science to establish a correlation between industrial growth (a vital part of national income) and electricity consumption. It’s more astonishing a fact since China was among the countries that, to protect industrial growth, rejected a proposal to contain electricity consumption to fight global warming.

According to a report by The New York Times, regions like Shandong and Jiangsu have seen a decrease in electricity consumption by over 10%. The report further revealed that the “coal stockpiled at Qinhuangdao port reached 9.5 million tons this month, as coal arrives on trains faster than needed by power plants in southern China. That surpasses the previous record of 9.3 million tons set in November 2008, near the bottom of the global financial downturn.”

Interestingly, local Chinese officials are known to keep two sets of accounting books as their performance is measured on economic targets. Apparently, officials often manipulate local data to show a rosy picture in their region. John Lee of Newsweek wrote in July 2010, “Statistics come in from all over the country. The provinces compile them with impossible speed – [in] around two weeks, or three times as fast as many developed economies with much more efficient processes of data collection.” US takes over a month to assimilate such information (with 1/4th of the Chinese population) and India takes more than a quarter.

The Purchasing Managers’ Index (PMI), which reveals financial activity with respect to trade of goods, further raises concerns. China’s official PMI (March 2012) was around 53 points (anything above 50 is considered a healthy economy), while the PMI projected by HSBC China was less than 48. More interestingly, the two figures have shown wider variations during global recession (and slowdown) as compared to normal periods.
 

Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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