From the financial firms that KNOW how to cook the books….
William Wan has a story in the Washington Post that made me burst out laughing just one paragraph in. Wan is tackling an important story — how much we can trust China’s economic statistics. But here’s the lede: When China announced better-than-expected trade numbers last month, the statistics were met with outright suspicion from international ...
William Wan has a story in the Washington Post that made me burst out laughing just one paragraph in. Wan is tackling an important story -- how much we can trust China's economic statistics. But here's the lede:
William Wan has a story in the Washington Post that made me burst out laughing just one paragraph in. Wan is tackling an important story — how much we can trust China’s economic statistics. But here’s the lede:
When China announced better-than-expected trade numbers last month, the statistics were met with outright suspicion from international powerhouses such as Goldman Sachs, Swiss financial firm UBS and Australian bank ANZ. The disbelieving scoffing only mounted days later, when the government unveiled numbers showing yet another positive trend — a narrowing income gap between China’s rich and poor.
Numbers in China have long faced suspicion, from optimistic recordings of visibly hazy air to the age of its Olympic gymnasts. But the credibility of its economic data is now coming under particular scrutiny, at a time when China’s growing global role weighs on investors, analysts and governments worldwide, even as the country’s economy is slowing after years of unbridled growth.
Now, on the one hand, there is no doubting the suspect nature of Chinese data (see the IMF staff discussion here). As Wan demonstrates well in the story, this is partly due to political machinations. There is scholarly evidence that political incentives shape the data reporting at times. To be fair, it might be due to the difficulty of data-gathering in a still-developing country, a fact that Chinese officials are willing to acknowledge.
No, what made me start laughing is that it was Goldman Sachs and UBS that are accusing China of data manipulation. This is like Lance Armstrong blasting the NFL for not having a more rigorous drug-testing regime. Goldman Sachs played a supporting but crucial role in cooking Greece’s books well enough to get it into the eurozone. Meanwhile, UBS traders had great fun manipulating the key LIBOR interest rate — when they weren’t busy laundering money for corrupt politicians.
So, really, props to Goldman and UBS for expressing justified skepticism about the veracity of Chinese economic statistics. I’d just feel better if they couched it as follows:
As organizations that have developed expertise in cooking the books to evade national regulators as well as our investors, we know when numbers look fishy — and China’s numbers look fishy.
Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner
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