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China Defends Data: GDP Figures Are "Objective", Reflect "Real Situation"

Tyler Durden's picture




 

Early last month in, "China’s Deficient Deflator Math Is One More Reason To Distrust Data," we highlighted an FT piece which suggested that thanks to a lack of “robust statistical systems,” Beijing may habitually overstate GDP during periods of falling commodity prices by failing to completely account for changes in import prices in the calculation of its GDP deflator. 

Effectively, the assertion is that China’s deflator simply tracks producer prices, and thus when import prices slide, the deflator understates domestic inflation and therefore overstates real GDP. In the simplest possible terms: when commodity prices are falling, China (and other EMs) may be routinely overstating GDP growth. Here’s an excerpt from FT’s original article

In the first quarter of the year, China’s deflator turned negative for the second time since 2000, coming in at -1.1 per cent. In comparison, consumer price inflation was +1.2 per cent. This means its inflation gap has jumped to 2.3 percentage points, even as it has fallen sharply in the likes of the US, as the chart shows. If the deflator is, as a result, understated, then real GDP growth is overstated by the same amount.

 

"A reasonable guess might be that true inflation was 1-2 percentage points higher than the deflator shows. In that case, real GDP growth in Q1 would have been 5-6 per cent [rather than 7 per cent]," said Cang Liu, China economist at Capital Economics, who added that the lower rate was closer to Capital Economics’ own estimate, based on activity data, of 4.9 per cent.

On Wednesday, China’s Q2 GDP printed right at the Politburo-mandated 7% and while the entire world is now accustomed to goalseeked data from Beijing (attn WSJ: it's not a secret) and has generally come to terms with the idea that in some quarters the figures may be flat out made-up, the deflator math issue poses a slightly more interesting question, as it points to a specific deficiency in statistical analysis (as opposed to relying on sweeping accusations about a generalized and endemic lack of transparency) and thus seems to merit a response from China’s National Bureau of Statistics. 

Sure enough, the NBR directly addressed the issue on Wednesday. FT has the story

China’s National Bureau of Statistics on Wednesday rejected suggestions that the inflation gauge it uses is flawed and exaggerates the country’s real economic growth rate.

 

Before the release of Wednesday’s second-quarter gross domestic product estimate, China’s nominal GDP growth rate had plummeted from almost 20 per cent to 5.8 per cent since 2011, a much sharper decline than the inflation-adjusted figures that have trended downwards from 9.5 per cent to 7 per cent over the same period.

 

The difference between this year’s first-quarter nominal and real growth figures implied that the so-called GDP deflator — a broad measure of inflation that covers all types of goods and services — was negative, at -1.2 per cent, for only the third time in nearly two decades. That transformed the government’s 5.8 nominal growth figure into 7 per cent real growth — bang on Beijing’s growth target of “about 7 per cent” for the full year. But it also implied that China suffered from nearly unprecedented deflation in the first quarter.

 

Analysts calculate that [the deflator] has stabilised at 0.1 per cent [in Q2], compared with -1.2 per cent in the first quarter.

 

In other words, nominal GDP growth rebounded from 5.8 per cent to 7.1 per cent between the first and second quarters.

 

"The inconsistency between the GDP deflator and other price measures seems to have gone away in the second quarter, after having been rather extreme in the first quarter," says Andrew Batson at Gavekal Dragonomics, a Beijing research house.

 

Andrew Polk, resident economist at the Conference Board think-tank in Beijing, noted that there had been a similarly sharp upwards adjustment in the deflator between the first and second quarters of 2014.

 

Mr Sheng said the NBS had done "deiligent research" on doubts raised by other analysts about China’s deflator series, adding they had "a lack of understanding about our calculation methods".

 

"There is room for improvement," he said. "But in general China’s GDP deflator hasn’t been underestimated, nor has GDP growth been overstated. Both objectively reflect the real situation."

In other words: 

So there you have it. After conducting "dilligent research," China has determined that its GDP data are an objective reflection of economic realities.

Any questions about the deflator series, the statistics bureau says, likely stem from a "lack of understanding about [Beijing's] calculation methods." Of course a bit of transparency would likely do wonders to clear things up, but when asked what the deflator was in Q2, an NBS spokeman declined to say, which only reinforces the general sense of mistrust that surrounds the quarterly data. 

Perhaps China could learn a thing or two about how to respond to tough questions by observing US politicians...

 

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Wed, 07/15/2015 - 15:03 | 6316470 synergize
synergize's picture

What is "Bull Shit" in Chinese?

Wed, 07/15/2015 - 15:05 | 6316489 Martial
Martial's picture

Burr Shit

Wed, 07/15/2015 - 15:15 | 6316533 froze25
froze25's picture

Yep, still don't like seeing Hillary in pictures.  And never trust the Chineese data.

Wed, 07/15/2015 - 15:26 | 6316570 clooney_art
clooney_art's picture

LOL ! I trust the data, sure.

Wed, 07/15/2015 - 15:43 | 6316641 knukles
knukles's picture

"Objective"?  How about "Accurate"
             NewSpeak

 

                          But what difference does it make?
              None, because nobody believes jackshit anyway anymore
      Except the people speaking the numbers which they know are lies

Wed, 07/15/2015 - 16:16 | 6316791 Lost My Shorts
Lost My Shorts's picture

Chinese data is perfect, reflecting the purity and manly virtue of the party itself.  Just ask around and you will see.  (Anyone who thought otherwise is currently away at free people's boarding schools studying the errors in their prior thinking.)

Wed, 07/15/2015 - 15:19 | 6316543 UndergroundPost
UndergroundPost's picture

Honest data of course supplied by Finance Ministers Wee Fuk Yu & Rai Ping Noh Wong

Wed, 07/15/2015 - 15:09 | 6316507 falak pema
falak pema's picture

Ping pong

Wed, 07/15/2015 - 15:58 | 6316715 guessagain
guessagain's picture

In statistics, there's a famous old saying, "Figures don't lie, but liars sure can figure..."

Wed, 07/15/2015 - 18:04 | 6317201 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

I can ask my Chinese friend if you want... (True, I'm corresponding with a Chinese girl right now.)

Wed, 07/15/2015 - 20:41 | 6317747 Mentaliusanything
Mentaliusanything's picture

You have the right to ignore reality but you cannot ignore the consequences of ignoring reality.-Ayn Rand

Your ignorance in your demand to stop selling into a stockmarket decline is proof of ignoring reality.

 

Wed, 07/15/2015 - 15:05 | 6316486 KnuckleDragger-X
KnuckleDragger-X's picture

Authoritarian and bureaucratic, a perfect mix for accurate and timely numbers......

Wed, 07/15/2015 - 15:10 | 6316491 JustObserving
JustObserving's picture
China Defends Data: GDP Figures Are "Objective"

And I will sell you the Brooklyn Bridge for only 10 Yuan.

Of course, US GDP data is equally fraudulent. In an economic war, truth is the first casualty.

Let's not forget that US inflation numbers are completely fake - so real US GDP is much, much lower:

The Chapwood Index for 2014 was 9.7% and official CPI in the land of the free was only 0.8%.  So the Nominal GDP of 5.6% for 2014 becomes real GDP of -4.1%.

The revised real GDP for years 2011 to 2013 worked out to -6.2%, -6.5%, -6.5% respectively.

What is the Chapwood Index?

"The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation."

http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...

 

Wed, 07/15/2015 - 15:12 | 6316517 ZoroAustrian
ZoroAustrian's picture

Seriously - why is China all of the sudden under the microscope when the US has been full of shit for decades?  The hyprocisy and shamelessness knows no bounds.  Distract, obfuscate, dissemble ... and then steal.  For the win, every time.

Wed, 07/15/2015 - 15:22 | 6316539 JustObserving
JustObserving's picture

If you adjust US GDP for real inflation for the last 20 years, it falls to around $6 trillion instead of around $17 trillion.  Then US debt-to-GDP would be above 300%, much worse than Greece (US debt is 18.3 trillion, unfunded liabilities are over $140 trillion).

“The first point I want to get across is that our nation is broke,” Kotlikoff testified. “Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today.

"Indeed, it may well be in worse fiscal shape than any developed country, including Greece," he said. 

http://cnsnews.com/news/article/barbara-hollingsworth/economist-tells-co...

 

Wed, 07/15/2015 - 15:32 | 6316607 headhunt
headhunt's picture

You can thank the leftists, fascists and of course our Divider in Chief

Wed, 07/15/2015 - 15:06 | 6316494 kaiserhoff
kaiserhoff's picture

When it's important,

  you have to lie.

Wed, 07/15/2015 - 15:07 | 6316496 Dr. Engali
Dr. Engali's picture

"There are no American infidels in Baghdad. Never!"

 

               ~Bagdad Bob

 

R.I.P. He was a good comedy relief in a tragic globalist's war.

https://youtu.be/yfAeMtcURg0

Wed, 07/15/2015 - 16:10 | 6316769 Tinky
Tinky's picture

A classic! Thanks Doc!

Wed, 07/15/2015 - 15:11 | 6316516 Rainman
Rainman's picture

Only listen to fortune cookie ; disregard all other fortune telling units .

Wed, 07/15/2015 - 15:13 | 6316525 Joebloinvestor
Joebloinvestor's picture

China.

Do you feed your pet their adulterated pet food?

Do you build your house with their drywall?

Do you cross your fingers when you drive on the Bay Bridge?

Do you swallow their bull shit excuses?

Wed, 07/15/2015 - 15:21 | 6316541 CPL
CPL's picture

What's a good website to look for Startup Tech Jobs in China?  I'm in the market for a change.

Wed, 07/15/2015 - 15:26 | 6316572 aliki
aliki's picture

yeah, and my girlfriends tits are real too ... because as we know, there are no such thing as fake tits

numbers cannot be made-up & its not a lie if you believe it

Wed, 07/15/2015 - 15:26 | 6316574 q99x2
q99x2's picture

Objectively it is true. 

1 True .in accordance with fact or reality.

"a true story"

synonyms: correct, accurate, right, verifiable, in accordance with the facts, what actually/really happened, well documented, the case, so; More

2.accurate or exact.

"it was a true depiction"

synonyms: accurate, true to life, faithful, telling it like it is, fact-based, realistic, close, lifelike

"a true reflection of life in the 50s"

adverb

1. literary truly.

"Hobson spoke truer than he knew"

2. accurately or without variation.

verb

1. bring (an object, wheel, or other construction) into the exact shape, alignment, or position required.

Is: third person singular present of be.

verb

3rd person present: is

1. exist.

"there are no easy answers"

synonyms: exist, have being, have existence; More

be present.

"there is a boy sitting on the step"

2. occur; take place.

"the exhibition will be in November"

synonyms: occur, happen, take place, come about, arise, crop up, transpire, fall, materialize, ensue; More

occupy a position in space.

"the Salvation Army store was on his left"

synonyms: be situated, be located, be found, be present, be set, be positioned, be placed, be installed

"the bed is over there"

stay in the same place or condition.

"she was here until about ten-thirty"

synonyms: remain, stay, last, continue, survive, endure, persist, prevail; More

attend.

"the days when she was in school"

come; go; visit.

"he's from Missouri"

3.having the state, quality, identity, nature, role, etc., specified.

"Amy was 91"

cost."the tickets were $25"

amount to."one and one is two"

represent. "let A be a square matrix of order n"

signify. "we were everything to each other"

consist of; constitute. "the monastery was several three-story buildings"

4. informal say.

"when I got there, they were like “What are you doing here?”"

It: used to refer to a thing previously mentioned or easily identified.

"a room with two beds in it"

referring to an animal or child of unspecified sex.

"she was holding the baby, cradling it and smiling into its face"

referring to a fact or situation previously mentioned, known, or happening.

"stop it, you're hurting me"

2. used to identify a person.

"it's me"

3. used in the normal subject position in statements about time, distance, or weather.

"it's half past five"

4. used in the normal subject or object position when a more specific subject or object is given later in the sentence.

"it is impossible to assess the problem"

5. used to emphasize a following part of a sentence.

"it is the child who is the victim"

6. the situation or circumstances; things in general.

"no one can stay here—it's too dangerous now"

7. exactly what is needed or desired.

"they thought they were it"

8. informal sex appeal.

"he's still got “it.”"

sexual intercourse.

9. informal denoting a person or thing that is exceptionally fashionable, popular, or successful at a particular time.

"they were Hollywood's It couple"

10. (in children's games) the player who has to catch the others.

Objectively: not influenced by personal feelings, interpretations, or prejudice; based on facts; unbiased: an objective opinion. 6. intent upon or dealing with things external to the mind rather than with thoughts or feelings, as a person or a book. So there you have it. You can believe him or not and it doesn't seem to matter what you think.
Wed, 07/15/2015 - 15:27 | 6316576 kchrisc
kchrisc's picture

"We lie all the time. Just not this time."

Liberty is a demand. Tyranny is submission..

 

Nobody farted, and yet the elevators reeks.

Wed, 07/15/2015 - 15:27 | 6316577 agent default
agent default's picture

If there is on thing China has learned from the US it is how to cook a book.

Wed, 07/15/2015 - 23:46 | 6318259 bid the soldier...
bid the soldiers shoot's picture

Fight fire with fire and cooked books with cooked books.

Wed, 07/15/2015 - 15:28 | 6316578 DOGGONE
DOGGONE's picture

Holy cow ... Is this a lead in to showing inflation-adjusted asset price histories to the people??

Just look at these hidden histories:
http://showrealhist.com/yTRIAL.html

Wed, 07/15/2015 - 15:31 | 6316593 starman
starman's picture

Oh ok then thank you so fuck you much!

Wed, 07/15/2015 - 15:32 | 6316611 Bill of Rights
Bill of Rights's picture

If they're out defending they've been caught in a lie...

Wed, 07/15/2015 - 15:36 | 6316624 Salah
Salah's picture

China doesn't dare tell the truth; there's too much money riding on the fantasy.  Just remember China, Pluto's got your number, and boy-howdy does it!

Wed, 07/15/2015 - 15:37 | 6316631 holdbuysell
holdbuysell's picture

Baghdad Bob's got nothing on these guys.

Wed, 07/15/2015 - 16:04 | 6316737 Consuelo
Consuelo's picture

 

Still haven't heard anything that quite compares to:

"God will roast their stomachs in hell at the hands of the Iraqi's..."

Always wondered about that particular choice of organ roasting...

 

 

Wed, 07/15/2015 - 15:46 | 6316662 rsnoble
rsnoble's picture

They just mistated GDP.  What the meant was 7% of the country hasn't been ruined by making walmart's crap.

Wed, 07/15/2015 - 16:00 | 6316722 jakesdad
jakesdad's picture

in their defense didn't paulson tell them w/a straight face that their us $ was safe?  and didn't a group of chinese students respond pretty much like we are to this?  sounds like they learned from the best...

Wed, 07/15/2015 - 16:01 | 6316727 Consuelo
Consuelo's picture

It must suck for finger-pointing financial elites in the U.S. to see a mirror image of their policies reflected in Mr. Xi...    

Wed, 07/15/2015 - 23:43 | 6318247 bid the soldier...
bid the soldiers shoot's picture

Forget our fingers, Connie, You should be proud as punch that XI has chosen to imitate the master thieves of the universe  --  that pile of scum you hold in such high regard.

I just wonder if Xi knows that the same fruitcake that said "imitation is the sincerest form of flattery" also said 'we're all the gutter, but some of us are looking at the stars."

What are you looking at Connie? Your monthly statement from Goldman Sachs? 

Wed, 07/15/2015 - 16:21 | 6316815 curbyourrisk
curbyourrisk's picture

There are lies

Damn Lies

and Statistics

Wed, 07/15/2015 - 16:28 | 6316839 johnlocke445
johnlocke445's picture

Here is what I do not understand. When the Chinese stock market collapsed no real value was lost. Isn't it a zero sum game? I think what we are talking about is the fact that an immense of money went from one asset class (stocks) to another asset class (yuan). So if I was a chinese stock investor and I did not sell my stocks then I still have the same amount of shares in the same company as before only everyone now believes it should have a lower price.

Wed, 07/15/2015 - 16:56 | 6316852 bid the soldier...
bid the soldiers shoot's picture

Oh, Lord, save us from the bull shit and the spreaders of the double standard.

Does no one remember the 3rd Q of 2009?

Over $100 trillion of MBS and CMO went toxic by the 1st Q of 2009 and the Fed decided it had to do something before the economy snowballed out of hand.

So the Fed proclaimed that the recession which began in Dec 2007 had ended in the 2nd Q of 2009.  Sure enough the DJIA, which had sunk to 6500 in March turned and started its climb up.  The spell that TARP and QE 1 cast had started to work. The middle classes' 401(k) had bounced and a great relief was felt in "the home of the brave'.

In October 2009 the first estimate of the 3rd Q GDP was published and mirabile dictu, the 3rd Q came in at 3.5%.  The Dow gained 100 points that day

Thank you, Jesus.

In November 2009 the second estimate came in at 2.8%.  Ooopsie.

And in December 2009 the final figure came. Yep, 2.2% and I'm willing to bet everything I have that number was phony too.

By the end of December 2009 when theGDP figure was anoounced, the Fed was lying about Christmas sales and alls well that ends well.

So if the polished turd queens from FT (and their pals at zh) want to get uppity about where the Chinese learned the art of economic number manipulation, my cod piece is available to them for manipulation.

Wed, 07/15/2015 - 17:30 | 6317063 Iam Yue2
Iam Yue2's picture

 

 

And what was it that Natixis' Alicia García Herrero allegedly said about the numbers, before her comments were seemingly pulled from the web;

"The chances that that data is real is very low."

One can only guess that the newly appointed García Herrero was venturing a little too close to the truth for comfort;

https://www.natixis.com/natixis/upload/docs/application/pdf/2015-06/0625...

 

I mean, after all, if you go around saying things like that, how else is your bank going to win business in Hong Kong and China!

Wed, 07/15/2015 - 18:34 | 6317304 bugs_
bugs_'s picture

they are tru...

they are objec....

they are REAL yeah thats the TICKET!  REAL

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