In a Bloomberg Online article dated July 05, 2013, it was reported that China’s Federation of Logistics and Purchasing, together with the country’s National Bureau of Statistics did not publish certain Purchasing Managers Index (PMI) figures including steel production statistics, inventories, and other essential economic information for the month of June 2013 in order to track the progress of China’s production growth. In a statement released by Cai Jin, vice-president of the Logistics Federation, he was quoted as saying that, “We now have 3,000 samples in the survey, and from a technical point of view, time is very limited – there are many industries, you know.” However, if one were to analyse the text of his statement, there is a question of why the two organisations embark on expanding the sample size when the Logistics Federation did not have the sufficient resources to work on the data in the first place. Moreover, the specific PMI figures released by the two organisations are paid content, and subscribers have paid their dues to have the data available, but to come out to say that they are not able to cope with the massive amount of sample size information does bound to cause some controversies and scepticism over China’s overall handling of data, and its communications with the financial markets around the world.
The latest set of revelations and controversies over China’s handling and communication of economic data does cast a spotlight on the truthfulness, and integrity of the government’s economic institutions. There are questions over the actual intent of the latest moves by the Chinese government, and how much scrutiny that has been undertaken by analysts in order to discern the data concerning the country’s declining economic growth seen in recent years. Readers might recall that Chinese government released their official PMI numbers for June 2013 on July 1 which stood at 50.1, while the HSBC PMI data which also released on the same day showed a figure of 48.2. A reading of 50 indicates neutral production levels. However, in the latest release, the Chinese government, together with its Logistics Federation did not include the essential readings including export numbers, imports, and inventories without any further elaboration from the government. The latest revelations of missing information, combining with the ongoing economic slowdown, and the use of fake invoices issues for customs declaration purposes, have resulted in the some degree of the lack of confidence over China’s use of economic data as a policy tool in order to communicate with investors on the true state of the economy.
The Chinese Logistics Federations’ Cai Jin has since came out to defend the latest controversial moves, saying that the suspension of the release of industry-specific PMI data was not going to be permanent, and that he denied that the decisions were based on the level of negativity in the content of data. Bloomberg did try to contact the National Bureau of Statistics, but did not receive their replies by press time. The industry-specific PMI numbers has always been accompanied by the overall official PMI data release, however, it is only available to paid subscribers. The industry-specific PMI numbers are important for many analysts who are trying to obtain a comprehensive overview of the country’s level of production, export orders, etc. With China being one the largest producers of crude steel, the information does provide some details on the level of steel production, and its impact on the global economy in areas such as construction, infrastructure allocations, amount of raw materials being consumed by Chinese industries, etc. If such data is not readily accessible or made available to paid subscribers, reliance on just the official PMI number might not tell much of the state of the Chinese economy.
In conclusion, there needs to be a re-examination of the latest moves undertaken by the Chinese government to withhold certain parts of the economic data in order to portray a distorted picture of the country’s economic growth progress. Selective disclosure is based on the prerogative of the country, and the Chinese government certainly has the right to disclose some parts of the data to the investment community, as it is the provider of such information. But, if one were to look from the point of view of a paid subscriber to access such specific content, there are questions over the quality of the economic data being released, and any paid subscribers will want to demand a higher level of service quality they are enjoying. Does the Chinese government only release economic information that casts a favourable limelight on the work of the policy makers, and are the latest moves to withhold specific PMI data are due in part of the overall efforts by the policy makers not to overemphasise China’s economic progress based solely on the Gross Domestic Product (GDP) readings? Readers might also recall that sometime in late June 2013, China’s President, Xi Jiping, has tried to reach out to the investor community that they should not base their assessment solely on China’s GDP growth when trying to evaluate the country’s economic progress, but instead should also take into account some aspects of social, human, environment development, etc. in order to come up with their conclusions on the Chinese economy. But, the other question one might ask is whether China follows international practices when it comes to their economic releases continues to remain unanswered, and perhaps not being addressed in a timely manner on the hopes that analysts will soon forget about the matter and move on.