Here is a piece from the Economist on Chinese GDP economic growth data (link is below)

It begins by noting many flaws in China's data are well documented

  • Provincial GDP figures do not add up to the national total
  • Quarterly and annual growth do not always mesh
  • Of the three ways to measure GDP (by counting output, expenditure and income), production figures are reported miraculously quickly, even as the counterpart numbers for spending and earnings appear agonisingly slowly

And then goes on, saying recent numbers have raised fresh questions:

  • Fixed-asset investment by private enterprises fell by 1.2% in July, compared with a year earlier. Meanwhile the equivalent figure for state-owned enterprises surged.
  • Services have been strong, even as industry has struggled.
  • Growth has not dipped below 6.7%, even as prices slipped into deflation in late 2015.

Its quite a long piece, but the gist is the unreliability of the data and the search for alternatives that can provide proxies for official data, eg.:

  • The "Li Keqiang index" (I've posted on this before, for example)
  • Chris Balding of Peking University's HSBC Business School in Shenzhen collected data on 69 "major industrial products" listed by Wind, a data provider
  • Goldman Sachs has gone even further, combining 89 products.

Its an interesting article and worth a read if you are interested (The Economist is often gated, but the link is here if you can access it: Superstition ain't the way)

However, what really caught my eye out of the whole piece were 2 things ...

Firstly, this (bolding mine) ...

  • Chris Balding of Peking University's HSBC Business School in Shenzhen collected data on 69 "major industrial products" listed by Wind, a data provider. A simple average of these products shows industrial growth (year on year) of about 0% in the second quarter, compared with the official figure of about 6%.
  • Goldman Sachs has gone even further, combining 89 products. Their measure shows industrial output actually shrinking in mid-2015, followed by a modest recovery since.

And secondly (again, bolding mine):

  • Investors may disdain China's official data but they cannot disregard them. The figures can still move markets

A big yes to the second point, as traders we would like reliable data, but it is also important for us to recognise what does move markets; whether its reliable or not, it still moves the markets and is something we must deal with.

Cheers!