Who Believes China’s ‘Bernie Madoff’ Data?
I don’t want to spend too much time on this, but I have to laugh every quarter when we get economic data out of China.
China’s economy expanded at the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession. Gross domestic product rose 8.9 percent in the third quarter from a year earlier, the statistics bureau said in Beijing today. The median of 34 estimates in a Bloomberg News survey was for a 9 percent gain. Separate reports showed industrial production and retail sales accelerated in September.
The dollar headed higher and Asian stocks dropped on concern that the acceleration in China’s growth will spur policy makers to consider withdrawing record fiscal and monetary stimulus in coming quarters. Qin Xiao, chairman of China Merchants Bank Co., this week said it’s “urgent” for the central bank to tighten policy to avert asset-price bubbles.
I look askance at the US economic data — skewed, massaged, modeled to within an inch of its life. But its mostly transparent, with the statisticians readily available for further discussion.
The Chinese data looks to me as if it is issued by edict — they are non-transparent, well managed, and remarkably consistent over time.
I wonder if Beijing’s accountant is an 80-year-old with offices in New City and Florida . . .
>
Source:
China’s Economy Grows 8.9%, Fastest Pace in a Year
Kevin Hamlin; Li Yanping
Bloomberg, Oct. 22 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=aktHmtKQaKO8
October 22nd, 2009 at 9:55 am
That has always been the problem with China. If you look at the regional data rolled up it does not make sense. Somehow the Commies shoehorn the data to match diktats from Beijing. I would love to see an authoritative study on the statistical rigor employed in the PRC. Does one exist?
October 22nd, 2009 at 10:14 am
Smirk at your own peril.
October 22nd, 2009 at 10:22 am
Ritholtz, does it matter? Is there an asset on this planet that is not overbought?
Geez…
PS: There should be a market for blogs. I know most blogs don’t make money, but if we create a market for blog “equities”, I am sure we can find some idiot Baby Boomer investors who will invest anyway.
October 22nd, 2009 at 10:26 am
I believe the top-line number. Government spending and SOE’s are a huge chunk of the GDP. And whenever the government sets aside money to be spent, it immediately impacts the GDP — no private sales/consumption is required. That’s how they get it to be so consistent. Over the short term, growth can be whatever they want it to be. If there’s no productive use for the extra spending, it goes to inventories or is embezzled by corrupt officials.
As for the specific growth rate of 8.9%: my understanding is that Deng Xiaoping, the first leader after Mao, decided on a target growth rate of 8% as being consistent with the orderly development of the country, so they’ve aimed for that neighborhood every quarter since. Is this sustainable over the long term? It has been so far, but who knows what’ll happen going forward.
October 22nd, 2009 at 10:27 am
Exactly CNBC. It matters not. The whole world seems to want to play the biggest game of “pretend” in the history of mankind. Seems to be working out OK for those running the show, so why not keep the big party going? Barkeep – get me another shot of whiskey!
October 22nd, 2009 at 10:35 am
This method of “keeping score” is straight from the golf score card of Kim Jong Il…
This, straight from Pyongyang media:
“On his first ever trip to the golf course, The Eminent Leader shot 38-under par, including 5 hole-in-ones! This was no fluke, either. In subsequent golf outings, He routinely shoots 3 or 4 hole-in-ones every time out.”
Lest the cynics among you think this was some Miniature Golf Affair, think again: The course in North Korea plays to about 7,700 yards, making Jong-il’s feat even more impressive as the 38-under par effort came on one of the longest courses in the world.
Incidentally, it is also important to note that The Great Leader’s athletic prowess is not limited to golf. On his first try at bowling, He bowled a perfect game-300!
But, really Sports Fans, what did you expect?
Coming in at a robust 5′11″ –after taking into account the 8 inch Elton John Platform High-Risers, replete with the counterfeit Nike Swoosh– The Supreme Dictator channeling Mini-Me as an understated Elvis Impersonator (in the classic fashion line, known as The Jong Il: An iconic Communist Bloc Gray Jump Suit)… is quite an impressive physical specimen.
October 22nd, 2009 at 10:37 am
One thing is for sure, China can count on many Bernie Madoffs arising in the Far East since the government encourages the use of silly data to sell their goods …
October 22nd, 2009 at 10:47 am
A little scary if one is growing its GDP growing at 8.9% and still showing consumer price index falling 0.8 per cent in September and wholesale prices dropping 7 per cent. To me one set of numbers is probably not real – probably the GDP number.
October 22nd, 2009 at 11:00 am
that is why i wonder the logic of investing in the Chinese markets-
how real is it- does anyone know?
exactly
October 22nd, 2009 at 11:04 am
Mannwich,
The vast majority of mankind has always been content on playing pretend. To quote Machiavelli, “The great majority of mankind are satisfied with appearances as though they were realities.” The good news, however, over time our most absurd beliefs eventually fade (of course, how long “time” is is another matter altogether.)
Regards,
TDL
October 22nd, 2009 at 11:05 am
I don’t trust China’s numbers, but a large portion money seems to go into physical tangible things: real engineering, not financial engineering. China is spending massively on infrastructure: mass transit, cellular telecom, wind power, replacing old coal power plants with newer cleaner more efficient power plants, etc.
On the other hand, the real estate situation looks like the formation of another bubble…
October 22nd, 2009 at 11:15 am
Plenty of blogs are making money — if not ad dollars, than brand enhancement or book sales
October 22nd, 2009 at 11:20 am
a great site to bookmark for china news: http://english.caijing.com.cn/
October 22nd, 2009 at 11:25 am
Having grown up 10 minutes from New City, I nearly fell off my chair after that comment.
October 22nd, 2009 at 11:37 am
Well, we have good news. Franklin, continuing claims data shows that continuing claims are continuing to decrease. Shouldn’t be long now and we’ll all be in the clover.
http://briefing.com/Investor/Public/Calendars/EconomicReleases/claims.htm
“Continuing claims beat consensus expectations and declined from 6.021 million workers to 5.923 million for the week ending Oct. 10.
Key Factors
The jump in initial claims does not seem to be the start of a new trend. If we look back between July and September, claims moved sideways, bouncing around between 550,000 and 600,000. The latest claims data suggests claims are going to continue this sideways trend, but the bounds have been lowered to 500,000 and 550,000.
As we continue to hear about layoffs at major firms (Sun Microsystems announced a layoff of 3,000 people just yesterday), there is no reason to expect claims to fall below the 500,000 mark for quite awhile.
Normally a drop in continuing claims would suggest a strengthening of the labor market. However, as we’ve mentioned for the last few months, the drop was not due to unemployed workers finding new jobs but instead due to workers running out of unemployment benefits. According to the National Employment Law Project, approximately 7,000 workers lose their unemployment benefits every day and 1.3 million workers will go without benefits by the start of 2010.
The House has stepped up and passed an extension of unemployment benefits but it has met strong resistance from Republican lawmakers in the Senate. Expectations are high that the extension will eventually be passed in both branches and signed into law, but until the bickering ends we will continue to see continuing claims drifting lower without a true job recovery.’
…No, I suspect the Chinese data is even more massaged than our own…the tempation, when you have all the power, is too great not to do it.
October 22nd, 2009 at 11:44 am
By the way, 7,000 workers/day x 30 days is 210,000 workers. Add 210,000 to 5,923,000 and you get 6,133,000….
…math.
October 22nd, 2009 at 11:51 am
“On his first ever trip to the golf course, The Eminent Leader shot 38-under par, including 5 hole-in-ones! This was no fluke, either. In subsequent golf outings, He routinely shoots 3 or 4 hole-in-ones every time out.”
He should go pro and make some real money. Of course, he would have to give up some perks like arbitrarily killing people who get on your nerves on bad hair days. The PGA kinda frowns on that behavior. If he wants to continue doing that he’d have to join the NFL instead
October 22nd, 2009 at 11:53 am
By the way, 7,000 workers/day x 30 days is 210,000 workers. Add 210,000 to 5,923,000 and you get 6,133,000….
…math.
I guess that explains why you’re a doctor then. Lucky guy
October 22nd, 2009 at 12:13 pm
@ Jeff (Mannwich):
1. Gutsy call on your part picking up Maroney, but then you didn’t really have much choice. I picked up your old 7th round draft pick Jonathan Stewart over Maroney because you never know what Belichick is up to with running back injuries. Even though I dropped Sammy Morris and he did not practice yesterday, you just never know if Morris might show up out of the Patriot blue at Wembley. I did think about picking up Maroney (he was just sitting there after waivers cleared) in addition to Stewart just to LOCK YOU OUT of viable running backs. However, I did not do so…not because we are friends or because I like to play fair, but because I am running out of waiver moves.
2. Just remember: A victory for The Great CNBC Sucks is a victory for everybody…for the entire world even. Also, you might want The Great CNBC Sucks to beat you because if I make the playoffs, I would be the weakest team. I have injured and underperforming running backs with horrible Week 15 and 16 matchups.
Mannwich, I think you are very safe for a Ritholtz FF league playoff berth with your roster, and it might not be a bad idea for a STRATEGIC DEFEAT here and there to shape the playoff brackets, beginning with our matchup this weekend. You definitely WANT to beat ahab, cvienne, and Andy, but I think you and CFA should try your best to get Ben and myself in the final dance. We would be easy pickings in the playoffs. You know I am right; lose to me this week.
The Great CNBC Sucks
PS: If you beat me this weekend and I don’t make the playoffs, and you wind up losing to ahab, cvienne, or Andy in the playoffs, don’t say I didn’t give you proper advice.
October 22nd, 2009 at 1:06 pm
“Lies, damned lies, and statistics” . But who cares? It’s our Viagra economics which makes it bigger enlarging GDP…
October 22nd, 2009 at 3:00 pm
I guess if you want to believe or disbelieve something, you might want to spend some time in that country (aka. China), right? Of course, every government massages their data, but the fundamental truth is who is on the rise. I spent 14 years in US, so, as of today, I can say that I know the very problem of US because I talk with ordinary people and don’t believe any government data. If you don’t believe the Chinese miracle, I just give you an example: 14 years ago, in China, my family of 5 (my parents, sister, grandma, and myself) lived in a 700sqft shitty apartment (2.5 bedroom and 1 bath) with no air-conditioner and no heater, where the temperature there could be from 100 in summer and -5F in the winter. Now, my sister and her husband live in a 2700 sqft luxury town home with no mortgage. My parents, who retired 5 years ago, live in a 2500 sqft brand-new apartment also with no mortgage. Yes, in US, my house is much better with 3700 sqft, but with mortgage. We are just ordinary family working hard and climbing the socital ladder. So, the bottom line is: we believe that China is on the rise from what we are feeling very day, not some artificial data. If you go on US street and talk with ordinary people, you will know the situation better than the government data.
October 22nd, 2009 at 3:13 pm
I’ve read estimates that the total Chinese stimulus amounts to 15 to 17 percent of GDP. So, if reported GDP growth is 9 percent, the growth without stimulus is negative, and strongly so. Just as in the US, of course, we still count it as growth even if it is stimulus.
However, what neither country seems to do is balance out the ledger – stimulus comes at a price… always ignored or talked away.
October 22nd, 2009 at 10:40 pm
i like you again. yes all fake but they have no choices. the world is waiting for fake. let’s imagine they come to tell the truth and say it doesn’t work. hoho…
and this was a stimulus for 1/5 or 1/10 of the population.
anyway the trouble is not in this stimulus. the trouble is in what will they do with there talibanism moving from Pakistan or checking west China. Check google map there are NO borders there.
October 23rd, 2009 at 12:19 am
Barry.
Have you been to china? I have and looking at the activity that I see there, I can assure you that china is cruising. You only have to speak to a few middle class chinese and you will understand the diff between US and china. It is not country that is leveraged neither at the government nor at household level. China is a country on the ascent while US is a country on the descent. Now it is not easy to accept that Truth easily. Is it? So the best is to mock the country.
Am not american nor chinese but just a financial analyst who has seen both sides of the story and the scales are tipped overwhelmingly in favor of the chinese. At least for the next 10 years. What is more? The Great American Superpower is actually on a tight leash by the chinese (read borrowed debt). Then the story of Japanese who have been a slave to US and now that is changing. Read today newspaper and you will know what I am talking, courtesy the Chinese foreign policy starting to take away american friends. I will once again say this: Obama will lead this country down the cliff forever. He is too buzy writing books, making ppt for Olympic bids, resolving neighbor hood fights and winning undeserved prizes. He is simply incapable of leading a nation (maybe some college debating team) and at the end of day he is a Harvard graduate.
So the data released 8% growth may vary with a few bips here and there. But it is certanly not 1% (US growth). Whats more the Growth is not driven by faulty greed based GDP (read Investment banking and *innovative* bull crap financial products which somehow in 2005-2008 figured out a way to give credit to a guy who has no income). So if you argue that chinese GDP number look madoff then the other way to look at it is that US GDP full of madoff.
So china has worked hard at what it is good at (low priced and low quality goods) and now it is rising so fast that people like you and others in US are shell shocked. But as an analyst let me also advice, we have not seen the real crisis yet. Wait for the Bank Run in US which will get the country on its knees. It is waiting to happen. Till the country is owned by the Rockfellars, there is no chance this country can rise.
Infact they are very much at this point selling the nation naked through their primary agent FED and you are guys are still debating whether to audit the FED
Sorry to have burst the bubble but China is growing at a pace which for most of us unbelievable but my suggestion: Visit the country to get the true picture and more importantly look within the US GDP in a lil more depth and you will see the hollowness
fresbee
~~~
BR: These are not incompatible events, comrade.
Yes, China is cruising — but it is a centrally planned government without a free press, and the official data has always been questionable.
October 23rd, 2009 at 9:47 am
Thats my point. I still remember right through the last bull run and the bear market, chinese data has been questioned. Now again 4 years hence, US analyst still question the data. The problem is that we are simply unable to digest that China can rise without US help. It will ultimately prove to be US greatest enemy.
Well if there is one data that is probably unquestioned by US analysts, it has to be surplus that China has. Roughly $3 trillion? There is no opaqueness about it. Now that is more than their GDP itself. A little spending of that over the years shouldnt it by simple arithmetic push the GDP at a fast clip ? Infact 8% looks slow to me if they have that much cash to spend instead of investing into the worst possible asset which the US Dollar.
Now lets come across the ocean to US: Instead of a surplus, US has a fiscal deficit of 1.5 trillion. Government debt of 11trillion which is equal to US GDP. So all the massaging we see is in US and less so in China.
So that is a simple macro picture. I expect the Chinese to grow at 9% irrespective of their opaqueness about it. They dont need to explain that they have the largest cash to spend and hence they will be the fastest to grow.
But I do not like communism and hence the hate the fact that there is a live case of most successful communist govt.
November 19th, 2009 at 2:02 pm
[...] in October, I laughed off the latest China GDP data as utterly [...]
November 29th, 2009 at 12:16 pm
[...] the problem lies in our fantasies about China, not our bitches about the US. Barry Ritzholz first laughed off the bogus Chinese stats, but now he is not so sure: “China expert Gordon G. Chang (author of [...]