Severity of China slump deeper than data suggests

Recent numbers suggest that China's economy may be regaining some momentum. A key indicator of manufacturing improved in January, suggesting the slump may be bottoming out.

For decades Chinese economic data was thought to be heavily massaged.

Local leaders were accused of sending Beijing phony growth figures to make themselves look better. The government was accused of manipulating the final numbers to show it was achieving its goals.

Today, the Cabinet's National Statistics Bureau is regarded as professional and honest but is struggling to keep up with China's rapid economic evolution. Its small staff repeatedly revises past growth estimates as new data come in.

It was only in 2005 that booming service industries such as restaurants were counted in economic output. That forced NBS to revise a decade's worth of growth figures. But only annual numbers were revised, not those for each quarter, making it harder for analysts to make historical comparisons.

“China's statistics system is really in a mess,” said Lu. “It's extremely difficult and close to impossible to calculate the quarter-on-quarter growth rate in China.”

The statistics bureau's boss says it wants to create a reporting system like those of other countries.

“We are doing research right now on setting up this system,” Commissioner Ma Jiantang said last month, though he gave no timetable.

Last month, the bureau made the surprise announcement that it was raising 2007's annual growth rate from an already stunning 11.9 percent. That meant China surpassed Germany that year to become the third-largest economy after the United States and Japan — a milestone that went undetected at the time.

For 2009, forecasts of full-year growth are as low as 5 percent — the best of any major country but China's weakest in nearly two decades.

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