Chinese macroeconomic data
As China is the second largest economy in the world after a spectacular rise from the tenth largest economy two decades ago, investors are paying more attention to its economic indicators.
When are scheduled macro news released? Most of announcements about the real activity are published by the national bureau of statistics (NBS) between 1 a.m and 2 a.m GMT, when European and American markets are closed, while decisions of the People’s Bank of China are published at 12 am. Figure 1 shows the timing of Chinese macroeconomic news. Local authorities try to respect the regular monthly calendar, but in fact, no everyone is waiting for the official release to see the data (Orlick, 2012). Officials share information with friends and families to get profit on, and sometimes they abandon protocol and announce the data before the release date (Orlick, 2012).
What are the most important scheduled Chinese announcements? Table 1 shows all scheduled Chinese macro data within a month sorted in descending order according to the relevance criterion. The most followed news by Bloomberg users are those about 1) inflation (CPI), 2) economic activity (GDP, PMI and IP) and 3) news about PBC policy (M2). Using an event study methodology, which consists in estimating the significance of the movement around macroeconomic news releases, Baum et al. (2013) show that the PMI, GDP and IP are the most regarded Chinese news in the U.S. stock index, Treasury, major foreign exchange as well as energy, metal and some agricultural commodity markets. Moreover, China’s PMI has greater impact on the Australian dollar and New Zealand dollar markets than the US PMI.
Can we rely on them? no consensus about this question; some Chinese macroeconomic news move the world markets in spite of concerns about integrity of the data provided by China’s government.
Inflation measures: the CPI is based on the prices of state-provided health, transport and education while ignoring their increasingly important private counterparts. The economist (2006) reports data for 36 cities collected by the National Development and Reform Commission and shows that inflation for medical care and education has been running at 5-10% in 2001 , well above the 1-2% reported in the CPI. The Chinese government continues to be secretive about the weights it uses to calculate it (Koch-Veser, 2013)
GDP and IP: The NBS uses sample surveys to measure the economy, but survey coverage remains incomplete, particularly in services (Koch-Veser, 2013). Moreover, data revisions are very important, especially those from the NBS. By providing an examination of China’s macroeconomic data revisions, Sinclair (2012) shows that the initial estimates of GDP, GNP, and the tertiary sector are biased.
This may be due to not only some statistical manipulations by local officials to overstate economic growth, but also by both private and state-owned enterprises whose have incentives to misreport income and output to avoid taxes and regulation.
End of the week effect: some of macroeconomic news, especially those from the central Bank are published at the end of the week, when markets are closed.
Despite those irregularities, some other studies argue that Chinese announcements are reliable and useful. Klein and Ozmucur (2003) found that the official real GDP estimates for China is consistent with a set of indicators that captures the Chinese economy more broadly. Jia (2011) does not find evidence of any measurement errors or irregularity in the Chinese real GDP data.
Table 1:Summary information of Chinese macro Data
1) Jia, Y. 2011. “A New Look at China’s Output Fluctuations: Quarterly GDP Estimation with an Unobserved Components Approach” George Washington University Research Program on Forecasting Working Paper No. 2011-006.
2) Klein, L. R. and S. Ozmucur. 2003. “The estimation of China’s Economic growth rate” Journal of Economic and Social Measurement, 28(4): 187-202.
3) Koch-Weser, I. N. (2013). The reliability of China’s economic data: An analysis of national output. U.S.-China Economic and Security Review Commission Staff Research Project Report.
4) Sinclair, T. M. (2012). Characteristics and implications of Chinese macroeconomic data Revisions. The George Washington University Institute for International Economic Policy Working Paper Series, IIEP-WP-2012-09.
5) Christopher F. Baum, Marketa Halova and Alexander Kurov Does Regular Economic News from Emerging Countries Move Markets? Evidence from Chinese Macro Announcements
6) The Economist. 2008. “An Aberrant Abacus: Coming to Terms With China’s Untrustworthy Economic Numbers” Finance and Economics. Economics Focus. May 1st 2008.
7) Orlik, T. 2012. “Debating Lies, Damned Lies, and Chinese Economic Statistics.” The Wall Street Journal Thursday, July 26, 2012: C12.