By ValueWalk From Business Insider

In the latest “Not The Onion” news from China “China’s Statistics Chief ” who may be making up numbers is under investigation.

China’s Central Commission on Discipline Inspection announced Tuesday (Jan 26) that it was investigating the head of China’s statistics bureau for suspected corruption. The latest announcement comes amid questions about the accuracy of Beijing’s economic statistics.

China’s Statistics Chief – Baoan under investigation for suspected corruption
The Communist Party’s anti-corruption commission said Tuesday that Wang Baoan is “suspected of serious violations of discipline,” a phrase Beijing uses as a euphemism for graft or corruption. Baoan was a former deputy finance minister who became the director of the National Bureau of Statistics in April 2014. The anti-corruption commission didn’t give details about its investigation, so it’s unclear whether Baoan is being investigated for his current role or former role.

Baoan joins several high-profile public officials who faced questions about suspected corruption. Since late 2012, China has been cracking down on corruption by targeting military officials, former judges, military leaders and the heads of state-owned companies. Last year alone, at least three officials at China’s top financial regulator were detained.

Interestingly, the announcement of Baoan’s investigation came within hours of his seeking to reassure investors and the general public about the health of the Chinese economy. Earlier, Baoan said there was no basis for the yuan depreciation considering China’s solid economic fundamentals.

The chief of the National Bureau of Statistics said in a briefing that the stronger dollar and downward pressure in China’s economy contributed to recent moves in the yuan exchange rate. He indicated that the yuan’s sustained depreciation could fuel capital outflows.

China’s statistics chief – doubts cast over China’s economic statistics

Of note, the investigation of the Chinese statistics chief comes at a time when China’s economic statistics have come under fire in recent years from analysts and economists as they believe the numbers are artificially inflated. China invited criticism in the past as its GDP computation was mostly tied to “GDP worship,” with officials’ promotions tied to growth targets.

Andy Xie, an independent economist said: “China does not have an independent statistics bureau. It depends on local governments reporting the numbers from the bottom up, and local governments do have an incentive to distort numbers.”

Last year, China clocked its worst growth in 25 years, posting a growth rate of 6.9%. However, some suspect that China’s true rate is substantially lower– closer to half the officially announced growth rate.

Last week, Wilbur Ross, WL Ross & Co, chairman & CEO, said China’s real growth is around 4%.

The Federal Reserve Bank of San Francisco said in its September working paper that it concluded the Chinese GDP figures have been an inadequate measure of economic activity. Conducting an investigation into the reliability of those figures, an ANZ study suggests that China’s economic figures remain within a reasonable margin of errors. The ANZ analysis points out that this is even though China was compiling its GDP figures in line with the IMF Standards for Data Dissemination.

After Tuesday’s more than 6% slump on Tuesday, A-shares fell again on Wednesday. The Shanghai Composite Index closed at 2,735.56 points, dropping 0.52% while the Shenzhen Component Index decreased 0.64% to end the day at 9,422.43. The CSI 300 Index had a 0.35% daily drop, closing at 2,930.35. Declines could have been much worse—mainland markets fell as much as 4% intraday on Wednesday before staging a strong rally in the last hour of trading. The ChiNext Price Index rose 0.17% and the Hang Seng Index was up 1.02%. Total trading volume on Tuesday was RMB509.1bn.

And Macquarie is out with a report this morning asking: China’s hard landing Has it already happened?

In the latest iteration of its widely used estimates of global growth and productivity, the Conference Board (CB) has adopted an alternative computation of China’s GDP as its base case. We are unaware of any other reputable agency adopting anything other than official numbers as a base case, although clearly there has always been a lot of scenario analysis.

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Although by the time China retroactively adjusts its GDP, it would be treated as history, in the absence of stronger productivity rebound, China would be in danger of getting stuck in the ‘middle-income trap’ and would be unable to inject incremental demand into the global economy. Stay safe.

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IMAGE:
Beijing statistics ValueWalk
cooking the booksFlickr/jeff_golden An accounting book on the stove.

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