It seems as if Lex of the Financial Times is finally catching up with this blog by questioning the validity of some of the official data coming out of China. We take this as a compliment.
In today’s column it talks about how the total for first-half Gross Domestic Product (GDP) growth numbers for China’s 31 provinces was almost 10% higher than the overall figure put out by the National Bureau of Statistics.
This suggests that provincial officials are being encouraged to report high numbers to help create the impression that everything is coming up roses. How can we trust micro numbers, on chemicals production and consumption, for example, if distortions in big headline numbers are taking place?
Retail sales growth of 16.2% in October was also questioned by Lex. These numbers are not a good proxy for real consumption growth because they include shipments to retailers and various types of corporate and government spending.
Strong year-on-year petrochemical production growth recorded for September might be believable because in the same month last year the world economy came to a halt as Lehman Bros folded. Ethylene output grew by 29.4% and polyester production by 33.9%.
The polyester sector might have benefited from market-share gains made in export markets as a result of the 2009 depreciation of the Yuan against other developing-world currencies.
This is the result of a re-pegging of the Yuan to the US dollar, which on Wednesday hit a 15-month low against a basket of trade-weighted currencies.
But China’s Central Bank, ahead of a visit to China by President Obama, yesterday acknowledged there was a case for a stronger Yuan.
As if often the chase with the Chinese government, though, only a few days earlier commerce minister Chen Deming had called for the creation of currency stability in order to protect exports.
So it’s far from clear if and when China will let the Yuan rise in value, which would likely reduce the volume of chemical imported to be re-exported as finished goods.
As we’ve said before, lack of clarity on real over apparent domestic demand-growth continues to prompt a nagging suspicion that re-exports are more important than some people think in the recovery story.
The International Monetary Fund (IMF) said at the weekend that the Yuan had become “significantly undervalued” since it was linked again to the dollar.
If insufficient ground isn’t given on the Yuan to satisfy the West, how long before politicians start targeting other “unfair” advantages such as this year’s reductions in raw-material import tariffs and increases in export-tax rebates?
On an individual industry level, pressure for anti-dumping and other trade measures is likely to only grow – a long with measures outside the control of the World Trade Organisation (WTO) such as safety and environmental standards – if developed economies don’t achieve sustained recoveries.