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Beijing boasts economic predictive power, markets more sceptical
[SYDNEY] Beijing's success in predicting the pulse of the world's second largest economy was on full view on Wednesday as growth handily matched its stated target, even if, for some analysts, the numbers don't always appear to add up.
It was also the 15th straight quarter where growth proved to be either at or very close to market consensus, a rare run that shows how economists have come to mold their forecasts to anticipate the official line.
"Whether you believe economists are able to mark a reasonable consensus or you feel the data is massaged, we don't expect much in the way of surprises from Chinese GDP figures," said John Kicklighter, chief currency strategist at broker FXCM in Sydney.
The track record is all the more remarkable as, to many observers, gross domestic product (GDP) for the first quarter seemed unfathomably greater than the sum of its parts.
While the economy officially grew by 7 per cent compared to the same period last year, almost all other indicators for the quarter came in short of estimates.
Industrial activity braked to lows last seen in the global financial crisis of 2008, while fixed-asset investment (FAI) grew at the slowest pace since the turn of the century.
The country's energy output also fell by the most since 2008, a telling miss as power consumption was once one of the favoured indicators of Premier Li Keqiang.
"Exports were poor, industrial production was poor, fixed-asset investment was much slower, retail sales soft, so how can GDP in real terms still be 7 per cent?" wondered Kevin Lai, senior economist at Daiwa in Hong Kong.
"It just doesn't make sense. I don't think looking at the GDP number is meaningful at all." Liu Li Gang, chief economist Greater China at Australia and New Zealand Banking Group, shared those misgivings.
"Obviously it does not add up. If you look at fixed-asset investment growth, retail sales and the very poor trade figures, it suggests that the GDP growth in Q1 could be well below 7 per cent."
Market suspicions about the reliability of the series were only heightened by news the statistics bureau had been unable to furnish a breakdown of GDP as it was not yet available.
Analysts have long harboured doubts on the credibility of China's GDP figures, if only because they can be produced just two weeks after the end of a quarter.
For a country of 1.3 billion people and 9.6 million square kilometres, that is a feat of statistical magic. The United States takes a month for a first stab at a quarter's GDP report and a full reading is not out for three months.
The US estimate, as in other developed nations, is also subject to much revision. Beijing's readings are not.
Yet investors appear content to accept Beijing's impressive predictive skills at face value, perhaps fearing the likely fallout in global markets should growth truly disappoint.
While Chinese share markets did slip on Wednesday in the wake of the data, the losses were trivial compared to the past six weeks of uninterrupted gains.
And there is likely to be some truth in the fact that even the official looking glass shows a slower trend.
"There are a lot of people who tend to be sceptical about the Chinese data, particularly among the Western observers," said Dariusz Kowalczyk, a senior economist at Credit Agricole in Hong Kong.
"Sure it's a big economy and it is difficult to get precise data, but I think these numbers should be fairly accurate and I'm not sceptical. They paint a picture of a decelerating economy and that is fairly accurate."