Great Marketplace segment from Matt Levin on how a economy (in this case China's) functions when it can't trust its own government's data.
How to deal with untrustworthy government economic data? Look to China
Liu said nobody really believes China’s National Bureau of Statistics when it says Chinese GDP grew over 5% last quarter.
China watchers like her look for data from third parties that are proxies for economic activity, like freight volumes.
“If economic activities are of a high level, then you would anticipate trucks are moving around,” Liu said.
Investors and economists also look to data on electricity use or nighttime light or heat emissions from satellite imagery.
These work-arounds help but they don't take the place of reliable official numbers.
“There are marketing firms, domestic Chinese firms, some foreign firms in China that do market research,” Kennedy said. “They do their own surveys of consumers.”
But that system is by no means perfect. Sure, the Chinese economy has grown dramatically the past few decades, but Derek Scissors at the American Enterprise Institute says the lack of good government data has nevertheless hurt Chinese businesses.
“Firms can't tell what's going on,” Scissors said. “They look at official data and say, ‘Should we get into this industry? I can't tell.’ And then they make bad decisions.”
As sub-optimal as that may be for China, a similar situation here in the US would almost certainly be worse.
It’s also important to remember here, nobody has ever really trusted the Chinese Communist Party’s statistics, and Chinese markets have learned to adapt.
Scissors said U.S. businesses have come to depend on good government data, and he worries whether politics might infect more than just the jobs report.
“If we're moving into an era where official statistics are unreliable, that's a huge shock the Chinese economy never had,” said Scissors.
Because they never had reliable stats to begin with.
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