Apr 2, 2012

The China PMI Contradiction. Or Who Can You Trust?

Very often the simplest explanation is the best. Why did HSBC's China PMI show a 4th consecutive month of contraction in March, while the official numbers generated by the National Bureau of Statistics indicate continuing growth?

Two months ago in Can One Trust China's Economic Statistics? we looked at some indications that the official government statistics may be untrustworthy. As all the evidence points to a serious slowdown,
the party line continues to be one of "fine-tuning" the economy and in effect slowly managing down the expectations of the investment community.

It is a little ironic that the official PMI came out on the same day that the now infamous Sino-Forest declared bankruptcy. If the lack of transparency and strict accounting standards allows companies to manipulate their revenues and inventory valuation so easily, what stops government agencies to fudge the numbers here and there?

(For more WhatIf posts, click here)

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