Scepticism Arises as Steel and GDP Data Challenge China's Credibility

24 Jan, 2024

Amidst the release of various economic indicators by China’s National Bureau of Statistics, the steel data stands out, reflecting the complexity of assessing the state of the world's second-largest economy.

While steel output was poised for significant expansion in 2023, December production witnessed a surprising 15% year-on-year decline, raising questions about the reliability of China's data.

Colin Hamilton, an analyst at BMO Capital Markets, expressed scepticism, highlighting potential "strategic under-reporting to meet official targets." The discrepancy in steel figures, released alongside a 5.2% GDP growth for 2023, underscores the global scrutiny facing China's data releases.

Economists have long relied on alternative indicators, such as electricity consumption, to supplement official GDP data, given concerns about its reliability. Beijing's tight control over information has heightened uncertainty, and discrepancies in the recent data release have fueled doubts.Despite headline expansion surpassing global projections, China grapples with a property slowdown, deflation, and consumer caution. Inconsistencies in the data set and concerns about the independence of statistical authorities add to the scepticism among experts.Rebecca Nadin from the ODI think-tank notes the difficulty of validating economic data due to limited communication channels with China, suggesting a national security focus may impact indicators.

 The choice of deflator for GDP calculations adds another layer of complexity, with experts cautioning about potential distortions.Investment banks, including HSBC and TS Lombard, use alternative gauges to supplement their analysis, acknowledging the challenges posed by China's official data. The debate over the accuracy of nominal GDP data and the flexibility allowed by deflator assumptions further emphasises the ongoing scrutiny and scepticism surrounding China's economic reporting.

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