China’s economic data is not reliable and could be a warning if Trump mixes from the Bureau of Labor Statistics

Officially, the Chinese economy increased by 5% last year, according to the country’s national statistics office. Certain independent estimates, such as those of Goldman Sachs and Citigroup, correspond to the official figure of China. Other estimates are significantly lower, such as GDP growth at 2.8% calculated by the Rhodium group, a research company focused on China.

Statistical measures may change or disappear without explanation. In 2023, after an increase in unemployment for young people at a 21.3%summit, the Chinese statistics office suddenly ceased to publish the data, citing the need to modify the measure. A few months later, the number returned, several points of lower percentage after excluding students from the measure. (Young unemployment remained high, despite the change: just under 18% of the 16 to 24 years were unemployed in July.)

Then there is a pressure to follow the official story on the economy. During the depths of the recent economic slowdown in China, economists and analysts have faced pressure to alleviate their negative analysis. “The party is really intolerant of economic instability, and therefore everything is smoothed,” explains Derek Scissors, principal researcher at the American Enterprise Institute.

But why is the collection of economic data from China so problematic? Do economists and investors use instead?

China data have difficulties

Economic data collection is really difficult, especially for an important and emerging economy like China. “The quality and extent of American economic statistics are simply on another planet compared to China data,” deplores Christopher Beddor, research director in China at Givekal. “It is striking of the little progress in certain regions in the past 20 years”, in particular in fields such as the measurement of services and the consumption of households.

The collection of Chinese data does not correspond to the way in which other countries measure economic data, partly due to its history as an economy planned in a central way. The scissors, which is also chief economist of the China Beige Book research company, suggests that many transactions within public companies, such as between parents and subsidiaries, are carried out on a “non-market” basis.

“In terms of surveys, they sometimes refuse to ask the right questions. They have no investigation into unemployment that raises questions about unemployment, ”he adds.

Dan Wang, Chinese director of the EURASIA group, underlines that there are incentives to manipulate the data that comes into national surveys. “Companies underestimate to avoid taxes, local officials to obtain promotions,” she notes. “This problem has been aggravated in this economic slowdown.”

High officials recognize that there is a problem. At the end of last year, China approved legislation that would hold local governments responsible for statistical fraud.

So how do investors make decisions?

The unreliable figures of China have created an “industry cottage of alternative measures for GDP growth for investors,” said Beddor, of Givekal. “But none really got industry consensus as superior or really reliable.”

In 2010, The Economist Formulated what he called “the Li Keqiang index”, appointed according to the former Chinese Prime Minister, who followed the volume of rail cargoes, electricity consumption and bank loans. The index was based on a disclosed service note from the United States Department of State which claimed that the Prime Minister – then a provincial government official – used these indicators as a better way to follow the economy of China than the official data more unreliable, in particular at the provincial level.

“I used to count on electricity,” said Alicia Garcia-Herrero, chief economist of Asia-Pacific at Investment Bank Natixis, although she adds that there is now more available data. Analysts are now going on data points such as sustainable consumer goods or the popularity of luxury products to measure things like consumption.

For Beddor, the answer is to “look at as many data series as possible and try to form a story of what is happening in the economy”.

Certain data points can be cut with other sources, including those outside of China, with regard to commercial statistics. And the private sector of China can also be a source of knowledge on how the economy is worn, even if these conclusions are not with a difficult number. “If you talk to many companies, you have a very good idea of ​​what’s going on,” explains Garcia-Herrero.

Unreliable data can also be precious as a signal of what Beijing thinks, says Wang. “Even if governments go beyond GDP growth, markets will take it as political support to reach the target,” she explains.

“Make decisions about China concerns political signals. It is not a market -oriented economy. State decisions on policies are the most important thing to follow, ”explains Wang.

And the United States?

If US economic data are starting to be a little more unreliable, this is likely to make companies more unapproved to make significant expenditure decisions. “When you are faced with this kind of uncertainty, it is more difficult to make major economic decisions,” said the scissors, from AEI. Companies can take care of engaging in new investments if they are not convinced that “the conditions are ripe,” he warns. “You will get less economic activity.”

This was certainly the case in China. National and foreign companies have been selected to invest in China due to fear that the country’s economy will be worse than official figures suggest, certain analysts even calling the “irrefonble” country.

Beijing’s promise to stimulate the economy and a deep AI boom has reversed the feeling this year – and Chinese market clues like the Hang Seng index surpassed the S&P 500.

But the country’s economy is still in difficulty. Retail sales in July increased by 3.7%below consensual expectations. Industrial production also increased at its slowest pace – 5.7% – last November. “We expect additional political support to raise domestic demand is soon to be deployed and a faster implementation of announced policies will also be necessary to help stabilize H2 growth,” HSBC economists wrote earlier this week.