- Recent Chinese economic data has been pretty terrible, at least compared to usual standards.
- A regional manufacturing activity gauge in China recently stopped being produced, deemed by the central government as being “illegal”. It had been significantly weaker than other nationwide activity gauges.
- There are reports the government wrote to journalists in China this year specifying economic topics that needed to be “managed”.
- With official data from the government continuing to weaken, the two reports suggest the economy may be even more dire than the government is letting on.
By usual standards, recent Chinese economic data had been somewhat horrendous, continuing to point to a further deceleration in activity after the economy grew at the slowest pace since the GFC in the September quarter.
In the year to November, retail sales grew by 8.1%, the weakest increase since 2003. Industrial output didn’t fare much better, expanding by 5.4% from 12 months earlier, the slowest pace in three years.
Separate PMI data on China’s manufacturing and non-manufacturing sectors also offered little to cheer about.
The official manufacturing PMI released by China’s National Bureau of Statistics (NBS) fell to 50.0 in November, indicating that activity levels across the sector was unchanged from October. Not since July 2016 has such an outcome been seen.
And while the non-manufacturing sector — comprising many of China’s “new-age” industries — did see activity levels improve, they did so at the slowest pace in over a year.
For those not familiar with PMIs, they measure perceived changes in activity levels across a sector from one month to the next.
A reading above 50 signals that activity levels are improving while a figure below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.
These are all data points released by the Chinese government, and all point to a worrying slide in economic momentum.
But here’s the kicker — the slowdown in the economy may actually be far worse than what the government is letting on.
After undershooting the NBS nationwide manufacturing PMI for five consecutive months, a regional PMI report from Guangdong province, located just to the north of Hong Kong, has suddenly stopped being produced, reportedly because the central government deemed it to be “illegal”.
According to Reuters, the regional manufacturing PMI, published monthly by the Guangdong Department of Industry and Information Technology, had been treading lower than the official index until the data series stopped updating in October this year.
The series had been produced for seven years.
Reuters said that in the last release for September, Guangdong’s PMI stood at 50.2, below the official gauge of 50.8 for the month.
After several months of silence on the matter, the NBS issued an update on its website earlier this week, claiming it had received complaints in late October that Guangdong had been illegally surveying manufacturing firms.
Seven years after it began production, and just as it was indicating that conditions in the massive manufacturing hub were even weaker than the national measure.
“The investigation showed that Guangdong’s Department of Industry and Information Technology failed to renew approval from the statistics bureau after its previous registration expired,” the NBS said.
The Bureau went on to say that the Guangdong government had been publishing the PMI data “without submitting the numbers to the bureau first to be audited and approve”, according to Reuters.
It said local officials were taking “corrective measures” and, if conditions were met, the data release could be resumed again in the future.
What exactly those corrective measures were not disclosed by the NBS.
One suspects that one higher readings would be advantageous for the PMI to come back online, particularly following separate reports earlier this year that the government was eager to avoid the dissemination of bad economic news to the wider public.
According to the New York Times, a government directive was sent to journalists in China in September naming six economic topics that were to be “managed”.
The report named such topics as worse-than-expected data that could show the economy is slowing, local government debt risks and the impact of the trade war with the United States, among others, that were to be managed.
“It’s possible that the situation is more serious than previously thought or that they want to prevent a panic,” Zhang Ming, a retired political science professor from Renmin University in Beijing, told the NYT.
Zhang suggested that rather than easing concerns, the expanded censorship strategy could more readily cause people to believe rumors about the economy.
“They are worried about chaos,” he said. “But in barring the media from reporting, things may get more chaotic.”
Along with creating the potential for impact, the reports will do little to appease international investor concerns that all is not well in the world’s second-largest economy.
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