And The "Fake" Headline Of The Day Award Goes To...

Tyler Durden's picture

Ahhh, the smell of "fake" headlines in the morning. It smells like victory, especially as there goes another conspiracy "theory"

 

We have been pointing out the massive discrepancies in Chinese trade data for the last 2 years (e.g. here) and it seems, once again, that conspiracy "theory" has become conspiracy "fact."

Since early 2011, when the murky world of commodity-backed financing really gathered pace and the even more shadowy accounting framework of fake trade invoices began, Chinese trade data has been remarkably over stated relative to the trade data of the rest of the world. As the charts below show, the gap is large and as Bloomberg reports, RBS believes it will not be possible to 'judge' just how bad China's economic data is until June when the debris of a shadow-banking-system credit creation boom will be "cleaned" from the entirely "fake" trade data that we are treated to each month. As Nomura notes, “The Chinese economy is changing quickly on a massive scale, making it difficult for its statistics machine to catch up with the reality.”

 

As Bloomberg reports, China’s data distortions will muddy analysis of the nation’s trade until at least June, making it harder to assess the strength of the world’s biggest exporter and second-largest economy.

That’s when China will provide figures that compare with what Royal Bank of Scotland Group Plc economist Louis Kuijs says are “pretty clean” numbers from May 2013 that followed a crackdown on inflated invoices used to disguise capital inflows.

 

 

...

 

The distortions add to investor and analyst concerns that the quality of data from jobs to gross domestic product isn’t good enough for a country that’s driving commodity prices and Asian growth.

 

...

 

People see a very weak number and then you need to explain that the reality is not so bad because of very complicated reasons that included fake invoices and stuff. It makes all of us doubt more about what the reality really is.”

It seems to us like there is a long way to go in the de-faking of trade data...

China’s GDP figures have attracted skeptics

 ...including analysts at Capital Economics Ltd., who said in 2012 that third-quarter growth that year was about 6.5 percent, rather than the 7.4 percent reported by the government. Premier Li said in 2007, when he was party secretary of Liaoning province, that GDP figures were “man-made” and unreliable, according to a diplomatic cable published by WikiLeaks in 2010.

 

Economists pay little attention to China’s main unemployment gauge, the quarterly urban jobless rate, which excludes migrant workers and has barely budged from 4.1 percent for more than three years. Its impact on markets is minimal compared with the U.S. government’s monthly jobs report.

 

The discrepancy between Hong Kong data for imports from China and Chinese figures for exports to the city in early 2013 highlighted the practice of over-invoicing that inflated China’s export data. Regulators started a crackdown in May, leading to a slump in reported overseas shipments.

 

The correlation in China between commodity imports and growth has been small and there is “clear evidence” showing import figures overstate the strength of domestic demand, she said. Some Chinese companies may have used imported goods as collateral to borrow funds last year, distorting the picture of demand, she said.

 

“I really don’t put much weight on import data,” she said.

 

“The Chinese economy is changing quickly on a massive scale, making it difficult for its statistics machine to catch up with the reality,”

So take your pick - the trade data is not as bad as the real drop in exports BUT the previous trade data is entirely fake and so this is catch-down to an old normal reality that suggests growth and demand is dramatically slower than many saw and hoped would last forever.