BEIJING – After China reported quarterly economic growth of 7.7 percent this week — far above anemic U.S. and European performance — global markets reacted by falling, wiping billions of dollars off stock prices.

The reason? Growth came in under the 8 percent expected by private sector forecasters who relied on Chinese trade and other data.

The market plunge highlighted complaints about the possible inaccuracy of Beijing’s official data and the intense, possibly excessive importance traders attach to a handful of Chinese economic indicators.

What matters more than a difference of a few tenths of a percentage point in growth from quarter to quarter is whether Chinese leaders are allowing the private sector to flourish by reducing the role of state industry in the economy, said Ben Simpfendorfer, managing director of Silk Road Associates, a consulting firm in Hong Kong.

“There is an obsession with these GDP numbers, and what really matters at this point is reform,” said Simpfendorfer, a former Royal Bank of Scotland economist.

China is watched especially closely because it is a major market for foreign goods from iron ore to smartphones and is relatively healthy, fueling hopes Chinese demand can help offset weakness in the U.S., Europe and Japan.

Advertisement

Confusion about how fast China is growing can hamper foreign and private companies in industries from construction to chemicals to consumer goods as they make plans for business and investment.

Beijing’s problems in keeping track of its economy stem in part from the fact that while it is surpassed only by the United States in size, China is growing and changing much faster than any rich country.

An understaffed bureaucracy inherited from the era of central planning is struggling to keep up with changes in trade, finance, manufacturing and city growth. Chinese companies have an incentive to avoid taxes or boost export rebates by misreporting sales and profits. Secrecy surrounding the collection and processing of official statistics leaves open the possibility they might be altered for political reasons.

Foreign and private companies look at government data with skepticism. Many rely on watching their own industries and markets more closely.

“I think everyone doing business in China is skeptical of the data,” said analyst Alistair Thornton of IHS Global Insight.

Thornton said three of China’s most closely watched yardsticks are rife with potential problems — exports, real estate sales and credit.

Advertisement

Export data have gotten the most attention lately after some analysts suggested companies might be inflating values on customs declarations. That might be intended to let them evade currency controls and move money into China. Reporting rising prices while exporting the same amount of goods might give a false impression of higher production.

The customs agency defended itself this month, saying its reports were based on goods that really were exported. However, that would not prevent exporters from submitting inflated values for them.

March exports were “substantially lower than reported numbers,” which might have helped lead to the discrepancy between GDP forecasts and the government report, said RBS economists Louis Kuijs and Tiffany Qiu in a report.

 


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.