Sudip Bandyopadhyay’s Blog

The Paris-based International Energy Agency recently released a report, Another Chinese Riddle: How Reliable Are GDP Figures?  In this  the intergovernmental organization cited research that China’s first-quarter GDP growth, announced as 6.1 per cent was most likely flat to negative.  As a result of such reports, public trust is eroding, and not just in China. Rumbling of this sort began to surface a few years ago when traders questioned economic data from Beijing. After  investigating government claims of astounding growth, some academics concluded that reported growth in Chinese gross domestic product might have been inflated by up to 200 per cent.  Belief  that Chinese officials doctor the data persists and not just among traders.

When previously unthinkable events challenge our most basic assumptions, and the current  global economic crisis is no exception.  People recognize that governments have an incredibly strong incentive to release encouraging economic statistics, and their confidence in our bedrock institutions is weaker than ever.  Statements from Washington, London, Brussels and Tokyo have not helped.  We have heard  leaders give voice to visions of apocalyptic collapse and “glimmers of hope”, sometimes within the same week.

Are official economic statistics being intentionally manipulated?  I suspect not.  But people aren’t stupid.  Savvy investors are seeing through official efforts to talk up the economy.   Why not get the numbers straight and let them speak  for themselves? If it takes a few more weeks to get things right, so be it.  While we await recovery, let us hope that our leaders resist the temptation to spin data to paint a rosy picture.  A tempered public discourse along with objectively accurate economic reports may lead  to a recovery in public trust.  If that translates to confidence, we might even see a few “green shoots” take root and flower into prosperity.

Confidence is elusive.  Once started down the slippery slope of doubt, investors stop taking things at face value and start looking for reasons not to believe.