Photo: Bank of America-Merrill Lynch
Early this past weekend New York Times reporter Keith Bradsher reiterated a popular belief that Chinese data is concocted to mask the extent of China’s economic slowdown.Bradsher wrote “officials at all levels of government are under pressure to report good economic results to Beijing” since this is the first time in about 23 years when a slowdown has coincided with a leadership transition.
And Bradsher focused in large part on falsified power data to make his argument.
Now, Ting Lu, China economist for Bank of America Merrill Lynch, is out with a note in which he says while China’s slowdown has been worse than anticipated, and while “we” have also complained about data quality, “we have some very different views from what the NYT article claims”, which “stirred markets today”.
Ting first questions the veracity of the Bradsher’s sources and some basic facts, saying he cited only one economist but later “extrapolated that to ‘Western economists’ and questions who this Western economist with ties to the NBS is. Moreover, he points to the part of the article that says “cities and provinces across the country had reported flat or only slightly rising electricity consumption”. And points out that in May Shanghai, Hubei and Jiangxi, officially reported negative YoY growth of power consumption.
He then questions the logic since, “China’s local officials might be incentivized to over-report some macro indicators such as GDP and FAI, but they have little incentive to over-report use of energy including electricity as Beijing imposes increasingly restrictive regulations on energy use per unit of GDP on local governments.” Further, Ting writes that leadership transitions in most regions are done and GDP growth is not as relevant for provincial governors to get a spot in Beijing.
Ting also says the room for manipulation isn’t as big as the New York Times piece suggests when it cites a “top corporate executive” who says that electricity consumption in Shandong and Jiangsu fell over 10 per cent YoY in May.
In this instance Ting says exact May data for Shandong isn’t available just yet but according to the Bureau of Energy is in positive territory. In Jiangsu its was up 4.2 per cent. “Is it possible for Jiangsu’s provincial officials to over-report power consumption by 14.2% in May?” asks Ting. “As one of the most developed provinces in China with relatively good governance, officials there simply do not have the guts for such a massive manipulation. Actually, Southern Jiangsu did report negative yoy growth of industrial power use at -1.0% in May, but Northern Jiangsu posted a high growth at 14.3% (Central Jiangsu’s growth at 3.2%).”
Finally, Ting seems to question Bradsher’s integrity as a journalist. He refers back to a April 2010 piece in which Bradsher had written about the renminbi’s peg to the USD saying the Chinese government was close to announcing “a small but immediate jump” in its value against the dollar, only for the online version of the article to later be “quietly revised” to say it would “allow its currency to strengthen slightly and vary more from day to day”. Ting again points out that in this instance Bradsher had attributed his quotes to “people with knowledge”.