Some nefarious businesses have two sets of books. One is for public display, the other so that the bosses know what is really happening. China has two sets of economic statistics, as discovered last week by bomlat's blog. Foreign economists have been closely following the Chinese electricity usage as an indication of what's really happening with the Chinese economy. Well, China has two sets of statistics about electricity usage. On August 5 the following postings appeared on bomblat's blog:
Chinese power output,July
July Power Output up 4.2%
» China's power output increased 4.2 percent year on year in July, outpacing a 3.6 percent growth in June.
» An industry analyst told Caijing that the rise in July confirmed the judgment that power consumption has been rising stably, backed by the recovering economy.
» Power output in major steel production regions showed double-digit growth in July.
Then on August 6, the following posting appeared:
An other Chinese electricity output data
SMEs' H1 Electricity Use Down 50%
» First-half electricity use by small and medium-sized enterprises fell almost 50 percent year-on-year, as these companies were more exposed to the economic downturn, the National Bureau of Statistics said on August 3.
» SMEs saw power consumption plunge 48.9 percent year-on-year, against a 5.9 percent industry-wide drop.
I can not understand it. We have two completely different data for the same parameter.
Economists have also been following the reports of rising housing prices in China as an indication of growing consumer demand. Here's another post from the same blog for August 6, this one about the rising housing prices:
The Chinese bubble is on a higher gear
Shenzhen Housing Prices Rose in July, Sales Down
» The average price for a new residence in the southern Chinese city of Shenzhen reached 15,875 yuan per square meter in July, increasing 7.5 percent from the previous month, said property advisers DTZ.
» But the transaction volume declined 17.3 percent month to month in July, to 549,300 square meters.
» DTZ forecast that without the support of enough transactions, the city's housing prices will drop to a more stable level in the future.
And here's the explanation from an anecdote published on June 11 at the China Economy Watch blog which makes clear that the reported rise in Chinese housing prices is based upon made-up numbers:
We have been told that the value of the condo we bought [in Beijing] last year has gone up 30% based on sales of new nearby developments, but it’s impossible to confirm since there is no secondary market. Originally we tried to rent the place, but we couldn’t find takers at any price that could remotely cover the mortgage, despite a prime location. When we decided to move in instead, we discovered that while the building was sold out long ago, hardly anyone actually lives there. Same with another 800-unit project down the street: every unit went for top dollar well before completion, but now the lights are off and nobody’s home.
On August 4, the Financial Times reported (China’s growth figures fail to add up) that the Chinese people do not believe the statistics being issued by their National Bureau of Statistics. Here are the details:
The Global Times, controlled by the People’s Daily, the Communist party mouthpiece, reported that the public reacted with “banter and sarcasm” to NBS figures showing average urban wages in China rose 13 per cent in the first half to $2,142.
It quoted an online poll showing 88 per cent of respondents doubted the official numbers.
An editorial on Tuesday in the China Daily, the government’s English-language mouthpiece, quoted another survey that found 91 per cent of respondents sceptical of official data, up from 79 per cent in 2007.
Little by little, the world's economists are beginning to realize that the World Bank was snookered by phony Chinese statistics showing increasing consumer demand. In its June 2009 Quarterly Update the World Bank predicted that China's GDP would grow by 7.3% in 2009, with consumption rising by 10% and imports falling. In response, I wrote:
There are only two possible explanations:
- The World Bank is incompetent. The Chinese economy is not growing. It is shrinking just like the economies of the rest of the world, which the World Bank expects will shrink by 3% this year.
- The Chinese are practicing protectionism on a massive scale. Even though their economy is growing rapidly and consumption is expanding rapidly, their government is preventing the Chinese people from buying foreign goods.
The most likely explanation is that the World Bank's incompetent economists were snookered. The Chinese government has indeed eased credit, but not for Chinese consumers. Almost all of the loans were issued to government-run businesses who were supposed to use the money for investments. One of the main uses that those government run businesses made of the money was to build up inventories of commodities which, for a while, benefited commodity exporters, including Russia and Brazil. That benefit is still rippling through the world economy, but it will prove short-lived.
Without China increasing their people's consumption of foreign imports, the world can expect a continuing depression, caused by trade imbalances. The world will not get out of the worldwide depression which started in October if it lets China act as a black hole, absorbing the world's demand without giving any demand back.
Disclosure: No Positions