China's Data Manipulation In One Chart, And Why The Real Data Implies Weakest GDP Growth In Over 20 Years

Tyler Durden's picture

By definition, exports from country A have to equal imports from country B. Unless country A is China. Then, central planning magic happens, as can be seen in the chart below showing the misreporting of Chinese exports to HK compared to HK's reported imports from China, which is just the latest nail in the coffin of Chinese economic data "integrity."

The issue, however, is that since China manipulates its data "upward", as does the rest of the civilized, "unmanipulating" world, none of the 'very serious people' have any incentive in calling China out - because suddenly all the world's growth data may fall under the microscope, as perhaps it should - after all it was less than two years ago that we observed that the entire world was exporting over $300 billion more than it was importing (numbers which should net to zero), leading us to wonder if it was aliens that were importing all the excess Louis Vuitton bags...

So for those actually interested, here is Sean Corrigan of Diapason breaking down the true numbers behind China's economy, who using real export and import data ex-manipulation and fudging, that China's reported 7.7% GDP would translate into a 5.5% Q1 GDP growth, the lowest rate of growth in 20 years!

From Diapason Securities:

Official number for China's 2-way trade flow growth in QI was + 13.4% yoy and for the first 4 months up 14% yoy.

Min of Commerce has apparently now calculated that 'real' trade -  i.e. ex cheating to import hot money via the Shenzhen-HK route - reduced these to 8.6% and 9.2% ... That is, a good 5% less for each of the two periods                     

Given that the game was to get illicit dollars into China, the greater part of the scam is likely to have seen exports overinvoiced and imports underinvoiced, so this fiddle presumably served to greatly boost not just the trade surplus, but also the reported GDP nos.

Although the MOC estimate only talks about 2-way trade adjustments without breaking down imports and exports separately, we can still deduce that their total is to be lowered by around $44 billion (CNY280) in QI and by another $18 (CNY110) in April alone. Intriguingly, this is of the order of the widely derided HK-China import-export discrepancy which amounted to ~$50 billion in the first three months.                                                                                                           

At the extreme, therefore, if we assume that all the fakery fell on boosting net exports (where, after all, all the incentives lie), we might begin by assuming that QI nominal GDP could have been overstated by as much as ~CNY260 billion, leaving it at around CNY11,630 bln in toto and therefore up by only 7.2% from 2012 rather than the 9.6% actually reported.

Again, if we push our assumptions to suppose that none of this changed the overall deflator, we might translate this into a direct hit to QI Real GDP of a similar magnitude, which would therefore see it  drop from the already anaemic 7.7% to less than 5.5%  - the lowest rate in over 20 years .... Even if the actual impact falls short of this extreme, we are still clearly due a non-trivial reduction to the count and should recall that this comes this despite a monster 6o% increase in credit, to boot.....          
                                                                                                                                                                                                                                                                                                                                                                                  Incidentally, the MOC says it will eliminate much of this in the May trade figures, so watch this space.

PS: Note too the comment that some of this was done by way of gold trades, where, as we know, record official import no.s have just been reported amounting to around 370kg or $18-20 billion in value from HK. Not ALL of that may have  gone to bulk up the dowries of China’s new brides, it would seem.         

And the actual Chinese source data from the 21st Century Business Herald, translated                                              

Trade urgent "dehydration" Shenzhen's foreign trade plunged in late April


Song Jing Guangzhou, 21st Century Business Herald 2013-05-08 23:25:46   

Core Tip: two sources have confirmed to this reporter, April 27, the Shenzhen Trade sharp decline, which will pull in Guangdong and even the country's trade growth rate to fall.

There are signs that regulators are distorted trade data "squeezed out the water.

Two sources have confirmed to this reporter, April 27, the Shenzhen Trade sharp decline, which will pull in Guangdong and even the country's trade growth rate to fall.

On April 17, the newspaper reported the abnormal growth of foreign trade of Guangdong in the first quarter, the Vice Governor Zhao Yufang Guangdong Province, in charge of foreign trade Shenzhen Jifu research. The source refers to the position in the recent State Council in charge of foreign trade high-level internal meeting to be highly concerned about the distortion of trade data.

Ministry of Commerce, told reporters on May 8, abnormal growth of the first quarter, foreign trade has aroused the attention of the regulatory authorities, a special investigation has commenced, "our calculations, if you weed out the non-normal factors, China's imports and exports in the first quarter and 1-4 it was only 8.6% and 9.2% growth. "

According to figures released by the General Administration of Customs on May 8, in the first quarter and 1-4 months of import and export growth were 13.4% and 14%, respectively.

Obviously, squeezed out the water "effect is temporarily unable to be reflected in the April trade data. Said the Ministry of Commerce said the internal trade figures for May is expected to be relatively real.

According to sources, Shenzhen April 27, foreign trade data has shrunk with the policy to suppress late April, the State Administration of Foreign Exchange and the banking supervision department of Guangdong province Bank window guidance and Risk Tips, "such as gold processing trade pledge financing of long-term letters of credit mid-April, the province has been halted. "

China State Administration of Foreign Exchange, Shenzhen Branch launched in late trade credit investigation in mid-April, banks are notified to rigorous examination of documents on trade in goods in the bonded area to prevent hot money through the cargo idle "cross-border arbitrage.

Shenzhen City Commission by letter officials told reporters on May 7, to strengthen monitoring in addition to the SAFE, the Shenzhen Customs inspection of goods also increased the intensity of Shenzhen City Commission by letter of the Futian Free Trade Zone and other special customs supervision within the enterprise monitoring and rectification.

On May 5, the SAFE issued a document required to tighten financial institutions foreign exchange position of the lower limit also requires foreign trade enterprises within 10 days explain the import and export of goods and the total trade balance does not match.

Shenzhen Futian Free Trade Zone, specialized in providing goods idling "and" Hong Kong and Macao tour "supply chain company party on May 8, told reporters," cargo idle "recently has been more difficult to operate, but the Hong Kong and Macao tour" there is space , the first quarter of this year, the company had helped a customer the same batch of rubber raw materials back and forth immigration operation 41 times.

The foregoing, the Commission by letter in Shenzhen officials reminded the measures of the current regulatory authorities are simply plugging the moment of a series of measures might be able to temporarily squeezed out trade water, do not rule out soon there will be new hot money immigration practices.

He explained that the goods idle "," Hong Kong and Macao day trips "and the use of long-term letters of credit pledged financing arbitrage practices not only exist in Shenzhen, in fact, trade provinces of Jiangsu and Zhejiang also such troubled, but Shenzhen adjacent to Hong Kong and convenient environment for the port trade exception problems are more prominent.                                            

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
reader2010's picture

Giant Ponzi based on sufferings of billions people and Mother Earth to enrich the ruling class of the world.

"Because Fascism was the proof that enlightenment and technology had not led to the liberation of human beings as the great philosophers of the enlightenment thought it would. Instead it led to Dachau, and so this was not its destination. This was not the destination that had been hoped for it. You know, the 19th Century believed in progress. Adorno once cynically remarked “There is no history that leads from slavery to freedom, but there is a history that leads from the slingshot to the megaton bomb.""

- Rick Roderick, “Habermas and the Fragile Dignity of Humanity” 


ghandi's picture

I am shocked!

Shocked to learn that the Chinese are not as truthful as they say because Walmart has the best, most enduring products ever created.


akak's picture

BigJim, your link is nonfunctional.

Skateboarder's picture

It works if you remove the / at the end of the link.

Midas's picture

Maybe the shit just got lost in a ghost city somewhere?

Frastric's picture

The biggest fun of watching the festering house of cards crumble is when people realise the extent of the rehypothecation of assets.

Skateboarder's picture

I don't think the commoner will ever understand the extent of the rehypothecation of assets, or derivatives markets, or shadow banking, or even the Federally belved mortgage backed securities, for that matter.

People can barely fucking add properly dude.

Rustysilver's picture

How dare you, sir: China manipulating data. How would you like spending 20 years in Upper Mongolia.

syntaxterror's picture

OMG, if United States government officials ever start lying about economic data like this, arrests will be made because we're 'exceptional'!

j.tennquist's picture

If the United States government ever STOPS lying about economic data, we'll have an unthinkably disruptive economic implosion and the person who had the audacity to speak the truth will get a personal visit from president drone-killer 

apberusdisvet's picture

So all of the "hopium" macro data are actually worse than we already think they are?

What's a psychopathic Central Bank head supposed to do?  What miracles can still be wrought?

I am Jobe's picture

waiting to see when BRK and WMT will move to China.

No growth bitchezz, jsut a fucking scam. Lies lies and more fucking lies

ekm's picture

China is way way way beyond data manipulation which implies "capability to calculate".

That data is so freaking large & incalculable, so they simply make them up without the need to calculate.

Wile-E-Coyote's picture

Watch out China will lobby for ZH to be shutdown. The US government will gladly comply.

ekm's picture

I think ZH is already filtered out in China from the state internet censors.

akak's picture

Then how do we explain AnAnonymous?

Or does the Chinese Communist Party make a ZH access exception for state-approved and state-funded propagandists and trolls?

ekm's picture

He's one of the censors. There must be thousands of them employed.

akak's picture

You are undoubtedly correct.

What an utterly contemptible and pathetic existence.

Alas, alas, kick it up a notch alas, just have to bear with it.

Aurora Ex Machina's picture

And they don't bother with stuff like ZH. There's plenty of criticism of the Chinese gov available in country, they just don't tolerate calls for organization / social movements.


ZH commentators couldn't organize a piss up in a brewery before there was a fight, it's like herding cats. And even after it was organized, Francis would be shouting in the bar that we were oppressing his rights to scream "THE JEWS WATERED DOWN MY SCOTCH" while we tried to order, by, you know, shouting louder and claiming the real fight club members wouldn't be in a bar, we'd be in a darkened hole in Mississippi where they served real American moonshine. Where if you take a piss, you have to dodge the alligators. That's authentic Fight Club, after all.[1]


Chinese Gov. don't care about sites like this. [And, 2.2 million hits max? TROLOLOLOLOL... not even on the radar. Checkout the real hubs of Chinese social media, where there's 100's million]





[1] Please note, I'm well aware of the geographical implausibility of this conjunction of alligators and river, it's part of the snark.

q99x2's picture

Fuck China. They obviously can't do my job. M'fers.

ugmug's picture

I happened to talk to a Chinese woman working here in the US as an accountant. I asked her about all the ghost cities back in China and she just laughed and said that its America who has all the ghost cities like Detroit.

akak's picture

She would probably also spout the Chinese state-taught propaganda that the Chinese invaded and annexed Tibet in order to free all the (non-existent) Tibetans who were forced into "slavery" in Tibet before being "liberated" by the glorious forces of Communist enlightenment under Mao, too.

dracos_ghost's picture

Trix are for kids, silly round eye. Not for the great PRC. They have the best and brightest in the world and their ghost cities are well thought out so how dare you ask such a ridiculous question about the Great Middle Kingdom.



Yellowhoard's picture

We could have a booming economy if we would only enslave the people and build empty cities.

ImReady's picture

Give it time ...They're working on it night and day.

W T F II's picture

Simple solution...

Just watch Australia.

It's a TRAIN-WRECK....!!

Therefore, so is China...!!

Never One Roach's picture
Housing boom over, not to return: RBA


The RBA says the move to inflation targeting in the early 1990s , and resulting lower consumer price rises, meant home buyers could borrow roughly twice as much as before.

This bank's head of financial stability, Luci Ellis, says this ability to borrow more explains a lot of the massive rise in home prices, both in absolute terms and relative to income, over the late 1990s to early 2000s.

"It also takes time for this additional borrowing capacity to bid up housing prices. But the transition does end after a while, and it is our assessment that it has now ended," she said in a speech to the Citibank Property Conference yesterday.


It's about get Down Under Ugly.

Element's picture

Can't happen soon enough, Australia's probably kaput at this point, just a matter of how soon it topples, with all else that's going on (this is the first time I have thought that since April 2009).

Even Germany is cracking up, this latest on Mish:

Ban KKiller's picture

All I know is the "air" in China is thick with dead pigs, dogs, chickens, horses but the rats are in your food. 

W T F II's picture

RATS..??!!...Damn...I thought that was "LAMB"...!!

earleflorida's picture

'but the rats are in your food'

yep... and the rat shit is in ours? [*courtesy of the budget-less fda!]-- pick your poison?!

Herdee's picture

Anybody that believes the U.S. Government and their methods of calculating unemployment and inflation lives a pretty sheltered,naive life at best.Commi China's no different.The corrupt communist leaders are no different than Washington crooks except for their skin and hair colour.After all,one crook needs financing of Government debt from the other.

BaggerDon's picture

Who cares about factual economic numbers?  Its all about YIELD, Yield TRUMPS all, just Larry Kudlow, Bernanke is the man!!!

Yen Cross's picture

        Get ready for another leg down in the aussie trade if this data is taken negatively later.

22:30       CNY             Chinese Fixed Asset Investment (YoY)       21.0%     20.9%      
22:30       CNY             Chinese Industrial Production (YoY)       9.5%     8.9%      
22:30       CNY             Chinese Retail Sales (YoY)       12.8%     12.6 

  * times are gmt-8


Dealyer Turdin's picture

It would be nice if they could multiply properly, too.

Youri Carma's picture

"... China's reported 7.7% GDP would translate into a 5.5% Q1 GDP growth, the lowest rate of growth in 20 years!"


"The 14.7% surge may have been overstated by 9%, according to RBS."

14.7% minus 9%= 5.7%

FROM: China’s Import Data Doubted by Nomura as Tariff Revenue Slumps
10 May 2013, (Bloomberg)

Me think like Faber said also, I think, 4.5%-5.0% real China GDP growth. Or maybe even 4.0%-5.0%

Marc Faber:

China won’t miss it [GDP growth target 7.5%] They will announce it.

But the reality will be much lower.

If you look at the statistics that are more reliable like Korean, Japanese or Taiwanese exports … then export figures from China don’t add up entirely.