China is often criticised for manipulating its economic data. In fact, Chinese vice premier Li Keqiang has said GDP number is “man-made” and for reference only.
But electricity consumption has often been identified as one of the more reliable indicators, and one that industrial production can be cross-checked against.
In a new report however Janet Koech and Jian Wang, economists with the Federal Reserve Bank of Dallas, present a chart that shows that Chinese industrial activity could be larger than it should be:
“Suspiciously, all 2012 data (red dots) lie below the trend line. This suggests that given the amount of electricity consumed, China’s official industrial production figures for 2012 are higher than those implied by the 2011 data trend. For instance, China’s industrial electricity consumption grew 5.6 per cent on a year-over-year basis in March 2012.
Using the trend from 2011 data, the estimate for March’s industrial production growth is about 9.3 per cent rather than the 11.9 per cent reported in the official data. This discrepancy could be due to unintentional, random survey errors. However, it is hard to imagine that all available 2012 data erred on the side of overstating industrial production growth.
Rather, it suggests that China might have overstated its 2012 industrial production data to mask the economy’s weakness. In other words, the slowdown in China could be worse than the official data indicate.”
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