China’s GDP: Still Making Up the Numbers

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Well here we go. Let the countdown begin. China’s fourth quarter GDP numbers come out on Friday. We reckon most of the run up in the All Ords to 4751 has been in anticipation of good news. If form holds, stocks will trade down once the news is in.

As for the news itself, well, is it really news? That is, does a GDP figure really tell you anything useful? As we mentioned last week, GDP is whatever government statisticians want it to be.

Granted, it has to bear some semblance to reality, or else it will be suspect. But otherwise…

For example, China’s positive November trade data from last week is receiving extra scrutiny. Analysts at Goldman Sachs and UBS say the 14.1% jump in exports – the biggest jump since March 2011 – didn’t ‘match goods movements through ports and imports by trading partners,’ according to Bloomberg.

Now just because one set of data doesn’t match another doesn’t mean anyone’s deliberately trying to deceive. GDP in a large economy is not an easy thing to measure to begin with. And it measures transactions more than something more fundamental. It’s a bit like measuring the health and quality of a meal by the number of calories in it, rather than by nutrition and composition of those calories.

But the data feast continues. Analysts surveyed by Bloomberg expect fourth quarter Chinese GDP to be 7.8%. That would be up from the three-year low of 7.4% in the third quarter. And really, what on earth could prompt an ‘analyst’ to estimate than an economy the size of China’s would grow by 7.8% instead of 7.4% or some other figure?

The answer is obvious. China’s GDP is a made up number, just like most GDP numbers. It’s also controlled by the State, to the extent that government spending is a large component of GDP (investment and consumption being other large factors). The Chinese economy has a history of hitting its targets. If it wants to hit 8% or so, it probably will.

This entire discussion will mean something to punters in resource shares. But what? As we said, the good news is already baked into the cake. Barring a big surprise in either direction, shares will probably shrug their shoulders and wait for something else to react to. What could that be?

Dan Denning,
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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5 Comments on "China’s GDP: Still Making Up the Numbers"

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shortchanged
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So in effect Dan, all these pundits, government officials and other odds and sods who quote these figures, are just guessing. Nice way to run a country, and how about all those who rely on these numbers to make investments? It makes you wonder what other ‘figures’ can be trusted, can anyone trust any government information at all?. There is a story there somewhere I’m sure.

Ross
Guest
The made up numbers that have facilitated China’s export driven growth economy have always been American and European. Talk about Chinese GDP as you will but in doing so you ignore the rising US import numbers which includes those imports from China rising. If you claim those US numbers are “made up” then point to the port volume figures and inland rail container movement numbers that back your claim. Elsewhere the US’s East Asia imperial pivot project is underway and 19th century styled American diplomacy is delivering stopgap Japanese cargo (as in “cargo cult” cargo) to the US Fed while… Read more »
Frank
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when I worked at the Australian Bureau of Statistics (ABS) it was rated the second most reliable source of government statistics in the world (after Canada) – I saw a delegation from China visiting to learn from us – I was bemused as I wondered how much they’d choose to follow Australian methods (as an independent by legislation body that cannot be told by the government of the day what to say) – and how much they’d stick with ruling party instructions to ‘make up this number’. I’m guessing as their ruling party hold on power becomes more and more… Read more »
Bill
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“Analysts at Goldman Sachs and UBS say the 14.1% jump in exports – the biggest jump since March 2011 – didn’t ‘match goods movements through ports and imports by trading partners”
BTW, in recent times, bulk exports don’t just by ship; there a freight train line connecting Chongqing in central China to Duisburg in Germany and the port of Antwerp in Belgium.

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