The world was aflutter when the Chinese National Bureau of Statistics announced GDP growth of 7.3% beating expectations of 7.2%. While focused on the difference between the .2 and the .3, others chose to herald the rising power of the consumer in driving Chinese rather than investment.
What most analysts seem to be overlooking is whether there is any actual accuracy to these numbers. First, we know that the Chinese NBS has a long history of manipulating official statistics. Can anyone claim that urban Chinese housing price inflation was 6% total from 2000-2011 with a straight face?
Second, all signs point to a decline in industrial activity. Steel production was essentially flat and grew at a tepid 3.8% well beneath GDP. Others have noted that electricity and other forms of energy have essentially decoupled from Chinese GDP growth recently. This implies that either the entire structure of the Chinese economy has changed, in macroeconomic terms, overnight or Chinese economic activity is not as robust as officially reported. While it is too early to draw firm conclusions, given the relative speed with which energy and GDP decoupled and the lack of change to the economy, it seems more likely that there is underlying weakness that is not being reflected in official data.
Third, while some have even used the recent data to herald the rise of the Chinese consumer, official data stands in stark contrast to all other reports about Chinese consumption. Whether it is luxury cognac makers or domestic beer makers, companies across industries have been reporting weakness in Chinese sales. Foreign cognac and Chinese beer makers are two examples but there is simply no evidence from company reports that indicate the Chinese consumer market is suddenly bursting forth to make up for a decline in investment and heavy industry. Large number of both Chinese and foreign businesses are talking about a consumer slow down and their sales reflect that.
This leaves a very simple scenario. Industrial activity is clearly slower and most companies are reporting sales described as soft, but somehow the official statistician is declaring results that beat expectations. Given what we know about the history of Chinese data, it might be worth it to carry a healthy skepticism about the official data.
There simply is no independent data from either the corporate/industrial sector or the consumer side to support the idea that Chinese GDP beat expectations.
Note: I was interviewed by the Dutch newspaper Het Financieele Dagblad where I said it is more plausible that GDP growth is 2-4% lower than official data reflect.