http://profitableinvestingtips.com/stock-investing-tips/is-china-going-to-kill-the-messenger-carrying-bad-economic-news
Is China Going to Kill the Messenger Carrying Bad Economic News?
When things go wrong in totalitarian states a common course of action is to find someone to blame and make a public example of them. In this regard China’s economy is slowing and the bosses of Chinese “managed capitalism” need scapegoats. Every month there is more news of an economic slowdown and now we see that the head of the country’s statistics agency is in trouble. Is China going to kill the messenger carrying bad economic news? Investors have long believed that large parts of Chinese economic data are fudged. Now The New York Times reports that an investigation of the country’s top statistician increases the doubt over reliability of China’s economic data.
The veracity of China’s economic data has been increasingly questioned as the slowing pace of the country’s growth has startled the world. And a new investigation into the official who oversees the numbers is unlikely to inspire confidence.
The Communist Party’s anticorruption commission announced late Tuesday that it was looking into the head of the country’s statistics agency over what it called “serious violations.”
It is unclear whether the investigation into the agency’s head, Wang Baoan, who became the director of the National Bureau of Statistics of China last April, is related to his current role or to his previous one as vice minister of finance. The commission did not release any further details about the inquiry.
Recently minor officials admitted to previously inflating economic figures. The assertion of the government was that since the economy had not really been growing as fast as reported, the decline should be seen as less severe! China needs to get its economic house in order and rather than dealing with the issues at hand they are choosing to kill, or at least imprison, the messenger of bad economic news.
How Bad Is the News?
Some economic estimates put China’s current economic growth at half the government figures at 3.5% instead of 7%. That sort of fudging is what keeps many from investing in China and doing business with Chinese companies. The Economic Times suggests that China may underestimate growth during economic booms and overestimate it during downturns.
2. When things go wrong in
totalitarian states a common
course of action is to find
someone to blame and make a
public example of them.
3. In this regard China’s economy is
slowing and the bosses of Chinese
“managed capitalism” need
scapegoats.
4. Before We Continue…
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5. Every month there is more news of
an economic slowdown and now
we see that the head of the
country’s statistics agency is in
trouble.
6. Is China going to kill the
messenger carrying bad economic
news?
7. Investors have long believed that
large parts of Chinese economic
data are fudged.
8. Now The New York Times reports
that an investigation of the
country’s top statistician increases
the doubt over reliability of
China’s economic data.
9. The veracity of China’s economic
data has been increasingly
questioned as the slowing pace of
the country’s growth has startled
the world.
10. And a new investigation into the
official who oversees the numbers
is unlikely to inspire confidence.
11. The Communist Party’s
anticorruption commission
announced late Tuesday that it
was looking into the head of the
country’s statistics agency over
what it called “serious violations.”
12. It is unclear whether the
investigation into the agency’s
head, Wang Baoan, who became
the director of the National Bureau
of Statistics of China last April, is
related to his current role or to his
previous one as vice minister of
finance.
15. The assertion of the government
was that since the economy had
not really been growing as fast as
reported, the decline should be
seen as less severe!
16. China needs to get its economic
house in order and rather than
dealing with the issues at hand
they are choosing to kill, or at
least imprison, the messenger of
bad economic news.
18. Some economic estimates put
China’s current economic growth
at half the government figures at
3.5% instead of 7%.
19. That sort of fudging is what keeps
many from investing in China and
doing business with Chinese
companies.
20. The Economic Times suggests that
China may underestimate growth
during economic booms and
overestimate it during downturns.
21. The bureau is supposed to provide
China’s leaders with an
unvarnished assessment of the
country’s economic strengths and
weaknesses, even while reassuring
the public about growth and
maintaining consumer confidence.
22. It is also supposed to release
enough detailed and accurate
information for investors and
corporate leaders to make sound
decisions about economic and
financial prospects.
23. China needs to be working from
unvarnished data if it is to deal
with its economic and social
issues.
24. Killing the messenger of bad news
is a short term solution to confuse
the public as to who is really at
fault for China’s current problems.
26. Every time there is a market
disruption in North America,
China, the rest of Asia or Europe
the bad news follows markets
around the globe.
27. Of late the bad news has
repeatedly come from China.
28. The answer to the world’s
concerns about the Chinese
economy is not to kill the
messenger carrying bad economic
news but rather that the Chinese
government become more
transparent and move toward
open markets.
29. In that regard The Street reports
that China may open its market to
foreign investors in an attempt to
stop the plunge in stock prices.
31. So government officials are
weighing whether to go after a
rather surprising source of funds:
individual foreign investors.
32. Considering the recent implosion
in Chinese stocks, the effort may
resemble trying to buy insurance
while your house is burning down.
33. But China is desperate to bring in
more foreign capital to support
private enterprise, so it’s thinking
of doing it anyway.
34. So long as the leaders of China
present scapegoats when things
go wrong, instead of taking
responsibility at the top, foreign
investors will be well advised to be
wary of investing in the casino-
like Chinese market.
