For many years, the Chinese politburo (not to be confused with the US Department of Labor) had a simple solution to accusations that central planning doesn't work: just make up the economic numbers. However, a few months ago China found itself in hot water when it became impossible to pretend its manipulated numbers were even remotely credible, driven by a massive discrepancy between China exports to Hong Kong and HK imports from China.
The immediate result by China, and the PBOC, as it attempted to regain some credibility was an drastic and epic move to force capital reallocation, in the process nearly wiping out its banking sector when interbank lending rates exploded to over 25%. For now, China appears to have regained some control even if the ensuing CNY1 trillion deleveraging that is imminent is sure to lead to unprecedented pain for the country that is more addicted to credit creation than any other.
But in the meantime, China has once again fallen bank to doing what it does best: manipulating economic data, in this case the recently announced PMI. Only this time there is a twist: instead of goalseeking reported data to comply with some artificial reality that Beijing approves of, now China is simply flat out refusing to report numbers, period!
An official report on China’s manufacturing in June omitted numbers for export orders, imports and inventories of finished goods, without any explanation for the gaps.
Five of 12 sub-indexes usually released with the Purchasing Managers’ Index were absent from today’s releases from the National Bureau of Statistics and the China Federation of Logistics and Purchasing. The others were for backlogs of work and quantities of purchases. The statistics bureau didn’t immediately respond to e-mailed questions asking for comment.
Analysts seeking a fuller picture of China’s economy could turn to an English-language version of the report released in Hong Kong by the Fung Business Intelligence Center, which included the missing numbers. Inflated trade figures this year highlighted flaws and omissions in data that investors rely on for assessing the strength of the world’s second-biggest economy.
“We hope it’s just a hiccup, and we certainly want the data released to be consistent and comprehensive,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. He said the sub-indexes of export orders, imports and stocks of finished goods are “important” in reading the Chinese economy.
The sub-indexes for exports, imports and inventories became available after the initial release in a separate data feed from the China Economic Information Service, said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong.
“The export and import sub-indexes are very important for economists to read the trade and economic situation,” Ding said. “They need to be a bit more consistent in releasing the data.”
What was not discussed is that in a centrally-planned and controlled world, nobody needs the anachronism of "data" - after all even the Fed has given up any pretense that fundamentals matter. So for everyone else, there is the Arthur Anderson defense: just shred numbers, and pray that the system is so corrupt that if they go after one, they have no choice but to go after all. At least until Skilling gets his sentence cut by more than half.