There’s no shortage of claims that Chinese economic statistics are lies or that Chinese economic growth is fake.
For example, Vitaliy Katsenelson, CFA has said as much in his ‘Mother of All grey Swans‘ presentation, which leans a little too far towards political rhetoric in our view.
What’s peculiar is how negative perceptions of Chinese economic data are still prevalent despite the fact that China’s major economic statistics are actually cross-checked by various different government and private organisations which each collect and calculate their own views, as we’ve highlighted the World Bank explaining in the past:
The World Bank’s Gao Xu argues that even a small manipulation of GDP would require a nearly impossible conspiracy. For one thing, there are tons of data collectors, including government, semi-government, and private foreign institutions:
“Just like how different parts of the economy are connected to each other within an organic whole, data released by different institutions is interrelated and need to be consistent with each other. Hence, any attempt to manipulate data—say, flattering the GDP number a little bit—requires concerted efforts of various government departments as well as private sector institutions. If there are some participants in the circle not doing this kind of massage to their own data, inconsistency arises, leaving footprints of manipulators in statistics.”
Xu adds that he hasn’t found any trace of data manipulation in recent years, despite dealing with it for over a decade. Moreover, he stresses that within academia, most researchers agree agree ‘that there is little sign that China is manipulating its economic data.’
Well, the most recent cross-check comes from Chinese customs data — where tax revenue has surged 46% year over year as of October 14th:
Of the total, customs duties reached 162.98 billion yuan and import linkage taxes hit 887.61 billion yuan, up 49 per cent and 45 per cent year-on-year respectively. Customs revenues from the 11th Five-Year Plan period are expected to total 4.41 trillion yuan.
During the first three quarters of 2010, the value of China’s imports increased 42 per cent year-on-year to 1.014 trillion yuan.
Imports are exploding.
So, yes, China’s growth is clearly fraught by sharp slow-down risks, isn’t sustainable in the literal sense (few ever believed their 10%+ growth rates would last forever), has some fudged data at the micro level, and is creating potential gluts of over-supply in many industries.
But… this is all actually pretty normal for a developing nation and isn’t a reason to think the entire country is a pile of cards.
It’s just how developing nations grow — fast and furious with all kinds of ridiculous over-shoots along the way. Many people lose their shirts, many earn vast fortunes, and you hit a few temporary crises along the way.
Yet just because these phenomenon exist doesn’t mean that a nation like China isn’t growing rapidly in many sustainable and ‘real’ ways at the same time. Don’t forget that America had its fair share of economic ridiculousness in the past, yet still became an economic behemoth on the long-run.
Thus to put things in perspective, developing Asia is basically the modern day equivalent of the American Wild West, and once you come to terms with the risk this brings, you can then intelligently hunt for the massive opportunities it also allows.