Re: China GDP data corrupt [working paper]

From: ltlee1 (ltlee1_at_hotmail.com)
Date: 01/21/05 

Date: 21 Jan 2005 05:31:38 -0800

raylopez99 wrote:
> Thank you, Mr. Yu! I appreciate your insight.
>
> Nobody is doubting that China is burning energy (the English phrase
> "burning the midnight oil" for working hard comes to mind!)
>
> The issue is whether burning energy is translating into GDP
(productive
> output). Think of it this way: I can run fast standing still, and
if
> I just jump up and down, without moving forward, I will not travel
very
> far but I will burn lots of energy and get a good workout (and
impress
> many people with my energy).
>
> As for Mr. Chang, I thought he was very courageous, as a lawyer, to
> write such a book. He probably killed his career in mainland China.
> Oh well, maybe he wanted to work in Taiwan after all.
>
> BTW, I did the calculations just now for Japan, and found that
Japan's
> GDP is not distorted (unlike China and India).

You are quite mistaken about only China and India's data being
distorted.

1. Basically, most economic data are somewhat unreliable. "In theoy,
you're trying to find out what the future is going to be like. That's
difficult when the past keeps changing." Martin Zimmerman, chief
economist, Ford Motor Company. Of course he was talking about U.S.
economic data being unreliable.

Further example: "On April 26, the Commerce Department of the United
States announced that the GNP grew at a moderate rate of 2.3 percent in
the first quarter of 1988. A month later, government statisticians
boosted first quarter GNP growth to 3.9 percent, a change of nearly
70%... the Commerce Department first announced the Gross Domestic
Product (GDP) grew at an annual rate of 2.7 percent in the third
quarter of 1992, it later revealed that the figure is 3.9 percent"
LABYRINTHS OF PROSPERITY by Reuven Brenner.

2. More recently, a lot of people complainted about U.S. inflation data
being intentionally distorted with hedonic indexing. Here is an
example.

-----------------
http://www.theinquirer.net/?article=12064

US computer sales aren't as strong as they appear
Chief Merrill Lynch economist kicks away the financial chocks

By N. Alex Rupp: Monday 13 October 2003, 07:27

Among other things, Rosenberg reports that the money being spent on
computers and other technology by U.S. corporations is nowhere near
what is being reported by the US Bureau of Economic Analysis. While
Washington reported corporate spending for technology to the tune of
$133 billion, Rosenberg estimates the actual number is closer to $15
billion in his Sept.5th and Oct. 6th reports. That's about an 89%
margin of error.

The misleading numbers apparently are caused by a technique called
"hedonic price indexing", which massages the investment figures to
account for improvements in technology. Washington economists
rationalize that while businesses are not actually spending more money
on computers and peripherals, developments in computing technology give
them "more bang for the same buck" and apparently doctor the numbers
accordingly, in order to suggest higher growth than is actually
occurring.

If tech spending "accounted for 30 percent of the overall increase in
GDP", Rosenberg's report implies that Washington is reporting GDP
growth at nearly twice its actual rate of increase--not a cheerful
thought for all of those who've recently re-entered the stock markets.

-------------

Many more example, here is another artcile,
http://sf.indymedia.org/news/2002/09/151105.php
if you look into it.

3. How about Japan's 0.1% GDP growth was reported as 0.7% grwoth
because of 0.6% deflation?

>
> Here is the data:
>
> Japan:
>
> 21.92 QBTU * 6.11 mil Person/ QBTU (Euroland) * $25k/person = $ 3.348
> Trillion, versus a published (on the CIA website) figure of $3.582
> Trillion. The two figures are within 10% of each other, well within
> any margin of error for such an inexact estimate. Also I assume "x
=1"
> once again.
>
> Right now, only China and India appear to be "liars"! :-) No offense
> of course.
>
> Sincerely,
>
> RL

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