HONG KONG - China's shares, which have led this year's global stock rally,
continued their remarkable gains on Wednesday after the government announced
that industrial output climbed 7.3% in April from a year earlier.
Never mind that the output gain was less than economists had expected, and was
down from the 8.3% year-on-year increase in March. Rather, be amazed that so
much more was produced even as the country's power output declined 3.5% in
April, more than double the pace of the 1.3% power output fall in March.
Output also surged even as exports collapsed more than 22% in April and after
overseas investment in the country slumped for a
sixth month in March to be down about 21% in the first quarter from a year
earlier.
Millions of Chinese workers have been thrown out of work as US and European
consumers of China-made goods rein in spending; the number of jobless could be
less than 5% - or almost 10%. But whatever it is, the wizards of Beijing, it
seems, are successfully transforming the economy with barely a hitch from one
that is dependent on overseas sales to one thriving on domestic demand.
The alchemy alleged to be doing the trick is the government's 4 trillion yuan
(US$570 billion) economic stimulus package announced in November, with
big-ticket items such as railroads and other infrastructure projects featuring
strongly.
Urban fixed-asset investment grew a more-than-expected, and quite remarkable,
30.5% in the first four months of this year, according to Bloomberg, citing
reports released on Tuesday.
In the process, Beijing officials are magically persuading the country's
shoppers - or those still in work - to spend more and more, just as their
livelihoods, just like those of their counterparts in the West, are threatened
by almost unprecedented economic storms.
Retail sales in April surged 14.8% from 12 months earlier, says the government,
after a similar jump in March, mocking critics who say Chinese people spend too
little and save too much for that inevitable rainy day.
All that, of course, is if you believe the figures. Many analysts, including
inside China, do not, and even the government is showing its concern,
introducing a new law from May 1 aimed at getting more reliable numbers. That
may lead to improved understanding of important parts of the economy such as
auto sales, which feed into the retail sales figures, and home sales - a key
economic indicator as well as being a factor in sales of things such as home
appliances and furniture, which again feed into the retail sales data.
As a cause of national pride, China now claims to be the world's biggest car
market, with vehicle sales setting a record of 1.11 million units in March, the
third straight month they have exceeded sales in the US.
Sales of domestically produced motor vehicles, including passenger cars, buses
and trucks, in March rose by 5% from a year earlier, according to the China
Association of Automobile Manufacturers (CAAM), an industrial body. The
increase has been interpreted as evidence that the Chinese government's
stimulus policies are taking effect. This year, retail taxes on small cars have
been halved and the government plans to give 5 billion yuan in vehicle
subsidies in rural areas to push automobile purchases, after sales growth had
slowed in 2008 to a 10-year low of 6.7%.
Auto analyst Peng Qing (not her real name) is more skeptical about the auto
sales figures, after trying in vain to get authoritative and comprehensive data
to carry out her work at a Beijing research company.
"Data received from industry associations and public security authorities is
always found to have lies and discrepancies," Peng said.
Muddying the waters is the issue of whether the count is made of cars issued
with new license plates. "Due to it issuing new license plates, the Public
Security Ministry is a leading source of comprehensive and authoritative auto
data. Such data is available on a regular basis overseas, but it is not made
public in China," Peng said.
It is, however, available in China at a price.
A senior official of a Chinese automaker, who preferred to remain anonymous,
said his company bought authoritative license-plate data from a transport
management and research institute directly under the Public Security Ministry,
which required its "preferred" customers to sign a confidentiality agreement
not to release the figures. Even then, the data the automaker could obtain was
severely limited. "We buy only the detailed figures relevant to similar models
that are produced by us and our competitors - but it costs at least one million
yuan a year," the company official said. More data is available for more cash.
The discrepancies between data on last year's passenger car sales disclosed by
industry association CAAM and the ministry data on 2008 newly registered
license plates are huge, according to another auto analyst, Zhang Yong (not his
real name), who said he obtained his Public Security Ministry data through an
"unofficial" channel.
"As the public and the media are denied access entirely to the authoritative
data on vehicles with registered license plates, the figures given by most
automakers are always 'injected with water," he said.
The country's leading auto producer for the past four years, FAW-Volkswagen,
sold 513,000 vehicles in 2008, according to the industry group CAAM. However,
the number of its cars newly registered with license plates last year was only
467,000 units, according to Zhang, using his ministry data.
Sales by China's top 10 automakers as provided by their industry body are on
average about 10% higher than those indicated by licenses being issued, Zhang
said. The biggest discrepancies, as much as 21%, are evident in the vehicle
sales of BYD, in which US investor Warren Buffett has a 9.9% stake. According
to CAAM, Shenzhen-based BYD, also noted for its battery-making business, sold
166,700 vehicles last year, while only 137,700 of its vehicles were registered
with license plates, based on Zhang's ministry data.
CAAM vice chairman Gu Xianghua, conceding that it depended on the automakers
for its data, said the association had called for disclosure of license plates
data.
The picture is little better when it comes to property sales, despite these
being a key indicator to the health of the economy.
Apartment sales in Dongguan, a heavily industrialized part of southern
Guangdong province hard hit by the export downturn, dropped last year by 40%,
according to the information website of the Dongguan housing administration
bureau. Not so, according to a report by the Guangdong statistics bureau and a
task force deployed by the National Bureau of Statistics (NBS), which claims
sales fell only 10%, to 5.096 million square meters.
Similar data discrepancies crop up in other cities, including Shanghai and
Beijing.
If the country apparently has only a vague idea of how many cars are being
bought or houses sold, it may have even less of a clear a picture of who can
afford to buy them.
The unemployment rate in urban areas at the end of last year was 9.4%,
according to the latest Analysis of and Forecasts for Social Development (or
the Blue Book on Chinese Society), released last December by the Chinese
Academy of Social Science (CASS), an academic research body directly under the
State Council, or cabinet.
The CASS figure was twice the 4.5% registered unemployment rate for the period
claimed by the Human Resources and Society Security Ministry. In April, Human
Resources Minister Yin Weimin said the urban registered unemployment rate was
4.3% at the end of March, from 4.2% at the end of December.
Concern over unreliable statistics, and the danger they pose to government
planning and spending, has prompted the government to set new regulations under
which anyone who makes false reports or compiles fake data can be fired. The
new rules came into effect on May 1.
"It was an open secret that local officials used bogus numbers to exaggerate
local economic growth, impress superiors and win promotion, while many
employees at statistics offices bowed to political pressure to report false
data," a government spokesman was quoted in a Xinhua report as saying.
Top officials, including those at state-owned enterprises, who give
instructions on faking statistics now face demotion, dismissal or unspecified
criminal punishment. It is the first time government officials can be held
responsible specifically for statistical corruption, Xinhua said. Misleading
figures impair information on which macro-control policies are based and
seriously undermine the Communist Party and the government’s credibility, the
report said.
Peng and Zhang questioned whether the new rules would change behavior on the
ground.
"Besides, the rules mainly target government agencies and state-owned
enterprises," said Peng. "I don't see that the big or private enterprises will
stop from exaggerating their sales."
A CASS researcher, Yi Xianrong, said data would improve only if the government
altered its policy of evaluating local officials based on their ability to
boost growth. Until then, officials were unlikely to change their attitudes
towards faking statistics.
"The big issue is about the interface between business and government, and it's
not easy to deal with by such regulations," he said.
Meanwhile, the benchmark Shanghai Composite Share Index, which has soared more
than 44% this year, gained 1.7% on Wednesday. And Goldman Sachs expects
economic growth to pick up even more pace - to 8.3% - this year. "We expect
domestic demand growth to further strengthen," the US bank said last month.
The government is more modest - 8% growth will be fine, it said this month.
Olivia Chung is a senior Asia Times Online reporter.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please
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