China Translated

What’s going on at China’s National Bureau of Statistics (NBS)?  Years of criticism from foreign economists on the way GDP is calculated had little impact on China’s lackluster statistical practices.  But a domestic uproar over the failings of the wage and house price data seems to have done the trick. 

Ma Jiantang, the head of the NBS, has been striking a decidely progressive note.  At a conference today, he made several promises for the reform of key aspects of China’s economic data. This is my translation of the key points of a Xinhua article covering the event:

‘GDP data - we are working toward a unified system for calculating GDP - a trial is already underway with several provinces.

House prices - consultations are underway with other ministries on a new way to collect and calculate house price data and a proposal for public consultation will be out the door in advance of the October holiday.  We will be taking advantage of the current population census to record the number of homes that are empty - as a contribution to understanding the level of speculative purchases in the residential property market.

Wage data - the NBS has already made a major reform to collect and publish data on wages of workers in small private firms.  Now we plan to improve data collection so that we will be able to calculate and publish data on wage dispersion.

Unemployment - the population census will be used as the basis of developing a new and more representative sample of the labour market - with the new system developed over the course of 2011.’

On GDP, I think Ma is referring to the different approaches used at a provincial level to calculate local GDP.  This is still the source of some embarassment, with the sum of provincial GDP typically larger than the NBS calculation of national GDP.

On housing, clearly the census is a much better means of determining the percentage of speculative purchases in the property market than the current approach favoured by China watchers - which consists of picking a few buildings at random and counting the number of apartments with no lights on in the evening.

On wages, data on wages broken down by low, medium, and high earners would be an important contribution to increasing understanding of how China’s labour markets work, and the gap between the haves and the have nots.  A more ambitious and challenging step would be to start collecting and publishing data on wages for migrant workers (the current survey only covers registered urban workers).

As is the case with the wage data, the key to improving unemployment data would be to develop a sample which includes the tens of millions of migrant workers who are currently excluded from the NBS calculation, but who are the most at risk of unemployment when the economy turns down.

You can see the original article here.

Labour markets, Regional, Statistics

In 2009, the National Bureau of Statistics found itself at the center of a storm of controversy over the wage data.  The announcement of an increase in the average wage of 12% for the year was so at odds with the reality of stagnant wages for many and redundancy for many more that it sparked a firestorm of angry commentary. 

Here’s a few of the comments I found online:

‘The NBS appears to have increased my salary again, if only they had told my employer’

‘This is a harmonized statistic’

‘This statistic is only about those who work in state owned enterprises, only those who know how to eat out at the public expense every day.’

The final comment hits the nail on the head.  With the NBS taking a simple average of salaries from mainly state owned firms, the wage data fails to reflect lower and more variable wages for the many workers who labour in the private sector.

To its credit, the NBS took the criticisms to heart.  This year, for the first time as far as I can see, they have published a breakdown of wages by state owned (strictly speaking state owned + public sector, joint venture, listed, and foreign invested companies) and private (which seems to mean small private) operations.

The NBS also explain why the official data for 2009 showed such a large increase in the average wage for the state sector.  Apparently the data was biased upward by a large pay rise for public sector workers - including a 16.1% hike in compensation for teachers.  Manufacturing workers, even those in the state sector, did rather worse, with only an 8.8% increase in wages.

But the real take away from the data is quite how low wages in the private sector are.  For 2009, the average worker in a private sector company was paid just CNY18,200, compared to CNY32,700 for the average state sector employee.  What is more, the growth rate of wages in the private sector is lower, just 6.6% compared to 12% in the state sector.

The new wage data is a step forward in terms of transparency and coverage of the statistical system.  But it also underlines the gap between the insiders who have benefited most from China’s years of rapid growth, and the outsiders who have not.

You can see the data on state sector wages here and private sector wages here.

Labour markets, Social Policy, Statistics

There are many sensible arguments to be made on whether China has a house price bubble or not. I belong to the school which thinks the whole structure of the market looks very shaky, but I do tend to agree that without a big change in some of the fundamentals (like a property tax, or interest rate reforms) a crash is unlikely. What virtually all observers can agree on though, is that calling the property market right is one of the most important questions if one is to forecast where the economy’s going to go over the next 18 months or so.

Which is why it’s so important for the government to manage the message on housing policies and mortgages. Cue the desperate scramble to stamp out the rumour that seemed to be gaining ground in the last few days that policies - notably those on third house mortgages and buying by people from outside the local region - were set to be adjusted. Even the China Banking Regulatory Commission was called in to stress that “the policy requirements and standards have not changed at all”.

Really, this should come as no surprise. It’s true that the sudden drop in housing transactions since the tough measures were imposed in April has made policy makers nervous about their potential to send the economy into a double-dip downturn. But although even the government’s rose-tinted house price index is showing a monthly drop in national prices (down 0.1% in June from May), the downturn doesn’t yet seem to have hit real estate investment, which by my calculations was rising at about the same rate in June as the average for the first half of the year. Until there’s a drop off in investment I think it’s going to be tough to sell a relaxation of policy.

Even then, the real challenge is to break the current binary situation in the property market, where sales are either feverish or non-existent. To me this suggests policy may have to be kept tighter for longer than many currently suspect - having a real estate policy that swings every six months is frankly worse than not having one at all. Worryingly, I’m not confident that the government will have the nerve to do this. Export growth is set to slow sharply in the next 18 months as the rest of the world tightens fiscal policies, just the domestic economy is cooling as a result of the housing cycle and the easing of the infrastructure investment boom. This all sounds a little bit like 2008-lite, and we all know how policymakers responded then.

Duncan Innes-Ker is a senior economist with the Economist Intelligence Unit

GDP, Guest contributor, Investment, Property, Statistics

China’s State Administration for Foreign Exchange (SAFE) has a difficult job.  They have to manage China’s massive reserves of foreign exchange - USD2.45bln at the last count and probably a few more billion when the figures for the second quarter of 2010 are released in the next few days.

SAFE is quite happy to tell the world how much FX reserves China has, but it is rather more cautious about revealing the details of where they are invested. 

A recent notice on SAFE’s website offers few details on where the reserves are stashed away, but it does provide some insight into SAFE’s thinking on the reasons for secrecy.  This is my translation of the main points:

‘The size of our foreign exchange reserves means that information about where they are invested could move global markets.  Publishing information about our transactions could lead to market turmoil. 

A higher degree of transparency could also negatively impact our ability to effectively implement our investment strategy.

The majority of countries are cautious in publication of data on their FX reserves, and do not publish information on specific transactions.  The IMF standards for data disemination in this area are not particularly stringent.’

The key point here is the second one.  If you are moving USD2.45trln in funds around, and you telegraph your movements to the market, anything you want to buy is suddenly going to get very expensive, and anything you want to sell very cheap. 

Secrecy about the composition of China’s FX reserves is partly realpolitic, but there is also a real financial logic behind SAFE’s determination to play their cards close to their chest.

You can see the full SAFE announcement in Chinese here.

International Relations, Monetary Policy, Statistics, US-China Relations

Although China’s exports to the EU and US have held up pretty well this year, all things considered, it’s clear that the fiscal consolidation just getting underway in these two big markets will make things tough going forward. New avenues to pursue export growth will have to be found, and these are likely to come increasingly from the emerging world. You can already see evidence from the trade numbers that exporters are making headway in penetrating new markets - exports to Brazil were up by an eye-popping 98% year on year in the first five months of 2010, and those to ASEAN markets by 46%.

All of which helps to explain why emerging nations like Brazil and India are beginning to join the US and EU in the interminable finger-pointing over the renminbi. India has also begun to use anti-dumping measures against China on a regular basis across a number of sectors. Is this a sign that a new front in China’s trade wars is opening up? I doubt it. India, Brazil and a few others (Mexico and Turkey spring to mind) have the mass market and the strategic global clout to get in China’s face on trade, but any other emerging nations that try throwing their weight around in this way are likely to receive a bruising reminder of Chinese-style trade diplomacy.

Take Argentina, which earlier this year imposed restrictions on imports of Chinese-made shoes, pipes and other products. China was not happy, and responded with quality control measures on soy bean oil imports that hit Argentine exports. Five months on it’s pretty clear who’s winning this argument: according to the China customs administration Chinese exports to Argentina were up by 75% year on year in January-May, while its imports from the country were down 42%. Given that few emerging markets will be willing to risk losing out on the Chinese bonanza like this, I think most will remain wary of trying to curb the Chinese import surge.

Incidentally, given the clarity of the Chinese trade numbers (regarded as some of the stronger data in China’s somewhat rickety statistical base) it is funny to see Xinhua running with the Argentinian data. These portray a far more harmonious picture, with both China’s exports to Argentina and Argentinian exports to China rising, by 39% and 19% respectively. Trade flows are also much higher than shown by the Chinese side’s data. Sadly in this case, given the background of events on the ground and the poor reputation the Argentinian government has for statistical truth-telling, I’d put more faith in the Chinese numbers.

Duncan Innes-Ker is a senior economist with the Economist Intelligence Unit

China - Latin America relations, Guest contributor, International Relations, Statistics, Trade

China’s official statistics tell a story of the rich getting richer and the poor getting, relatively, poorer.  The official data suggests that the richest 10% of the population have earnings 9 times those of the poorest.

But according to Professor Wang Xiaolu, that’s just the half of it.  Professor Wang’s original research in 2005, suggested that the richest 10% of the population had an average disposable income of CNY96,000/year, several times higher than the CNY28,000 suggested by the official statistics.  Professor Wang believes that the reason for the massive gap between official and real income for China’s rich is that the extra earnings are the proceeds of corruption, and are therefore unlikely to be reported.

According to the most recent posting on his blog, Professor Wang has now updated his research, and found much the same thing.  The ratio between the income of the richest and the poorest 10% of the population is not 9, as suggested by the official National Bureau of Statistics numbers, but rather 21.  Professor Wang notes that this massive disparity will likely have serious implications for social stability, and also strip away public support for economic reforms - which are perceived as disproportionately benefiting the rich.

In an intriguing side note, Professor Wang notes that the massive income of the very rich also helps explain the rapid growth in China’s household deposits.  This puts a new spin on the idea of China’s households as frugal savers.  If Prof Wang is correct, China’s very high household savings rate does not reflect poor and middle income households saving carefully for their future, it reflects a few very rich households parking their ill-gotten gains in the banking sector before buying a yacht.

You can see Professor Wang’s blog posting here.

Social Policy, Statistics

Lately China’s sustainable development goals have been in the news again following the announcement of a sudden jump in energy intensity of production. China has been tracking this interesting metric – which is linked not only to energy use and carbon production but also to technological improvement and movement up the industrial value chain – for some time (warning: apparently nobody outside the relevant departments really understands how it is calculated) and it is said to be a particular focus of Premier Wen Jiabao. Energy intensity had steadily declined 14% from 2005 and was almost on target to meet the 2010 goal of a 20% reduction, but took a sudden 3% (annual) jump in the first quarter. Heavy industry, responding to the tremendous infrastructure push of last year’s stimulus package, is seen as the culprit. Following the news Premier Wen got all medieval, promising in widely published reports to take an “iron hand” on the issue.
For deeper analysis, see the excellent Green Leap Forward.

China’s top leadership has been increasingly visible on alternative energy, low carbon development, pollution control, climate change and other sustainability issues, and Wen seems to be making the energy efficiency target a line in the sand. I think we can safely assume that this is not because senior Chinese leaders are lying awake at night worrying about snail darters and burrowing owls, but because they see these issues as serious potential threats to continued economic development and social stability.

Last week, the Chinese Academy of Sciences published a report of a speech given by the Vice Director of the Chinese Institute of Engineering Du Xiangwan called, “After 2050 China Will Enter a Stage of Green, Low-Carbon Energy Development.” The speech was notable to me for its clear description of the importance of changing China’s current energy use – followed by a set of energy goals that can could perhaps be described as realistic: In his description of China’s energy mix in 2050, renewable energy, including hydropower, has taken a position as a major (but unquantified) component, but coal still occupies 35% to 40% of the total, natural gas has 10%, and nuclear has 15%.

Here’s the report’s description of the issue and China’s strategic approach:

Our Nation Must Move Towards Green, Low Carbon Energy Sources
The tasks of China’s sustainable development of an energy development strategy can be summed up as “scientific, green, low carbon energy strategies,” and can be further summarized as speeding up the transition of regulations and controls, strengthening the primacy of energy efficiency, implementing controls on total energy use, guaranteeing appropriate demand, optimizing a diverse structure, carrying out “green and low carbon,” leadership from science and technology, and a high efficiency economic system.

Proposing such a strategy stems from the challenges faced by China’s energy resources. Du Xiangwan said that China very quickly will become the world’s largest energy consumer. “If China’s energy consumption is maintained at an average growth rate of 8.9%, by 2020 China’s energy consumption will reach 7.9 billion standard tons of coal, which is half the world’s current energy consumption.”

He pointed out that this kind of economic development model would obviously run into very severe restrictions. To support society and the economy’s scientific development, it is necessary to put forth total consumption control standards for fossil fuels, and to plan for the overall speed, structure and consumption model of development. Furthermore, China’s current crude energy exploitation and use results in severe environmental problems.

“No matter how much climate change is disputed, China’s energy must move towards green and low carbon,” Du Xiangwan said.

The original speech is here.

Don Johnson is a senior economist with AECOM

Energy, Environment, Guest contributor, Industry, Statistics

China’s National Bureau of Statistics (NBS) gets a lot of stick, but in the last year they have actually acquitted themselves rather well.

First, movements in the official GDP data seem to have been a fair representation of the state of the economy - with little evidence of the political manipulation that was feared at the beginning of 2009.

Second, where there were oddities - like a mismatch between electricity output and GDP in the second quarter, the NBS did their best to explain them.

Now, the NBS is promising to publish wage data which disaggregates high and low wage earners - responding to the widespread criticism that the average wage data is biased upward by a few high earners.

This is my translation of the main points of a recent news article on the planned revisions to the wage data:

‘On the 23rd February, the head of the NBS bureau of population and employment Ping Nailin revealed that the way wage data is produced by the NBS will be revised, including showing the composition of wages and difference between high and low wage earners.

Ping said that the current approach to publishing average wage levels did not well reflect the situation in the labour market.  The NBS will conduct experiments with the new approach in 2010, with a view to a wider roll out at a later date.

Responding to questions about the popular belief that the NBS data overstates wage increases, Ping acknowledged that there were weaknesses in the wage data system, including failure to capture wage data from workers in private enterprises, and problems with the average wage level being dragged up by a few high wage earners.

Ping said that wages for employees in private sector firms have already enterered the NBS calculation.

Responding to concerns raised by netizens about wage growth in relation to GDP and the CPI, Ping noted that in almost all years since 1990 wage growth has outpaced GDP growth, and it has outpaced increases in the CPI in every year.’

We covered the popular criticism of NBS wage data in our post on New Words for 2009.

You can see the news article with Ping’s comments here.

Labour markets, Statistics

Southern Metropolis has an article in a recent edition reviewing new words that appeared in 2009.  Chinese appears to be a language that lends itself to new constructions, and they are often powerfully reflective of the public mood.  Here are the top 3 for the year gone by - as selected by the newspaper:

‘Hide and Seek’ (躲猫猫 duo maomao): after Li Qiaoming, a resident of Yunnan province, died in police custody, the official report into his death concluded that he had died during a game of ‘hide and seek’ in the prison.  Following on from a string of ridiculous official explanations for deaths in custody, including ‘removed handcuffs using a 1-yuan bill then hung himself with shoestring’, ‘died from over-excitement’ and ‘died taking a bath’, ‘hide and seek’ has become a shorthand for any kind of official explanation that manifestly misrepresents the facts of the case.

Narrow dwelling class (蜗居族 wo ju zu); the pop culture phenomenon of 2009 was the enormous popularity of a TV show called ‘Dwelling Narrowness’ (蜗居 wo ju).  The show relates the struggles of a group of young people as they try to bridge the gap between low wages and high costs of accomodation.  One of the young female characaters even strikes up an adulterous relationship with a middle aged government official in the hope of helping her sister afford a home.  ‘Narrow dwelling class’ refers to the very large numbers of Chinese people who find themselves in a similar predicament - either unable to afford a home or able to afford one only at ruinous cost.  Incidentally, ‘wo’ (蜗) means snail.

‘Age of Compulsion’ (被时代 bei shidai): China’s economy appears to have done very well in 2009.  But optimistic official pronouncements and statistics from the government are still sometimes at odds with the reality of a hard year for many Chinese people.  A family of phrases have sprung up to reflect this gap between the official statistics and the lived reality.  ‘The National Bureau of Statistics increased my wages’ was one joke that did the rounds on the Chinese internet, as web citizens reflected on the gap between official reports of rising wages, and the reality of stagnant wages and unemployment for a large number of citizens.  Another iteration is ‘my university found me a job’ - referring to the practice by universities of manipulating their graduates’ record of finding employment - to create a false positive impression for potential future students.  ‘Bei shidai’ is an umbrella term for this family of phrases.

Like many Guangdong based newspapers, Southern Metropolis is at the radical end of China’s publishing spectrum, and this is doubtless reflected in their choice of words to reflect the spirit of 2009.  That said, these words have been coined in 2009, and are in wide currency on the Chinese internet.  I’ve only translated the first three of a set of 10-new words (I’ll try and return to the rest in a later posting).  But the list so far covers one word to describe mistrust of government statistics, one to describe official cover-ups, and one to bemoan the high cost of accomodation.  This is not suggestive of an entirely contended population.

You can see the original Chinese article here.

Culture, Law, Property, Social Policy, Statistics

China’s National Bureau of Statistics (NBS) is having a difficult year.  First came the disparity between GDP (growing) and electricity output (shrinking).  The NBS explained that this was because some energy intensive but low producivity industries had been hard hit by the downturn. 

Now the NBS is under fire because of data on average wages.  The NBS data, published in July, showed wages growing 12.9% yoy in the first half of the year to CNY14,638.  This was a big surprise to lots of Chinese people who have either found themselves redundant, with reduced hours, or lucky to hold onto their job at the same salary.

I think there’s a perception amongst some people in the USA and Europe that there is no awareness of or discussion of social or economic problems within China, and that the sword of truth and shield of justice are wielded solely by heroic foreign commentators. 

In fact, on a range of issues, there is a lively and informed debate within China, with newspapers, think tanks, and civil society holding a range of different views.  Our post on environmental issues a few days ago illustrates that this is true for subjects like the trade off between pollution and growth.  It is also true for the question of economic statistics.  The 21st Century Business Herald has an article in today’s edition about the problems with the NBS data on wage growth.  This is my translation of the main points:

‘Huang Xiao has lost face.  Huang works at the Beijing office of the National Bureau of Statistics.  All of her friends and relaives want to know how the NBS calculates the national average wage.

In July, the NBS announced that the national average wage for the first half of the year had risen 12.9% to CNY14,638.  When she went home for a break Huang found herself besieged by her friends and relatives: ‘how have you increased our wages?’ they asked, sarcastically.

‘Everyone asked me how we could have worked out a 12% increase in wages?’ said Huang.  ‘They said that their wages had not increased, and  neither had the wages of anyone they knew - the economic downturn had seen to that.  So how could we have calculated that average wages had increased?’

Huang felt embarassed, like she was the cause of the ‘NBS got me a job, NBS increased my wages’ jokes on the internet (Chinatranslated note: these jokes refer to the disparity between the high official employment rate and growth in average wages and people’s real-world experience that it is tough to get a job let alone a wage increase - hence the line ‘被就业’ ‘被增长’ which mean something like ‘the NBS has got me a job’ and ‘the NBS has got me a pay rise’).

Huang eventually worked out that the reason why the NBS had suggested that wages were increasing was because of the sample set they used.  The sample included big state owned enterprises and collective firms (which have been the main beneficiaries of the government’s stimulus plan and which have not shed jobs), but did not include smaller and private firms (which have not received so much support and which have been the first to shed jobs and cut wages).

At a work conference held on the 1st August, Ma Jiantang, the head of the NBS, was frank about the need to improve the quality of official statistics.  He said: ‘our statistical data can not yet meet the demand of government and the public, and reliability can not yet satisfy people’s demand.’

Original article in Chinese here.

Financial Crisis, GDP, Labour markets, Social Policy, Statistics