Aurelia Butler

For investors and policymakers worldwide, China’s quarterly economic data is a starting point in decoding the state of the world’s second-largest economy, but the latest figures contained a puzzle of their own.The country’s gross domestic product had grown 0.8 per cent in quarterly terms and 6.3 per cent year on year in the second quarter. The combined quarter-on-quarter growth over the previous four quarters, however, implied growth of 6.8 per cent.The mismatch arose because of official “seasonal adjustment” revisions by the country’s National Bureau of Statistics to the quarterly growth data in 2022. While such revisions are routinely made, economists say their effect has become larger in recent years.The lack of any detailed explanation on the process illustrates the difficulty in parsing China’s statistics at a time when the trajectory of its economy is seen as crucial for global growth.“That is where we are at the moment. How much has the economy grown in the second quarter, or [has it] not? That is a very important question for the markets and policymakers alike,” said Louis Kuijs, chief Asia economist at S&P Global. “Everyone is asking, ‘Is the Chinese economy stalling?’ It’s not easy to give a waterproof answer to that.”China has “certainly become more of a black box, and it’s just continuously moving in that trajectory”, said Shehzad Qazi, chief operating officer at China Beige Book, which publishes alternative economic indicators based on surveys of private companies in the country. The surveys have consistently implied weaker consumption than official figures show.

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Longstanding questions over how to interpret China’s economic indicators have a new sense of urgency in 2023, when official data has pointed to a loss of momentum following the lifting of Covid-19 restrictions. Policymakers are grappling with trade headwinds, weak consumption and a property cash crunch that has dragged on for almost two years.As in many other countries, China’s official data is typically seen as a “reference” that can be supplemented with other indicators, ranging from steel production to energy consumption. But while some new data series have been added, a wide range of other sources have been discontinued, often for no clear reason. It has also become more difficult to access supplementary and detailed information.“Disappearing series has been part of the challenge of analysing China in general, but accessing reliable data has definitely become harder in the past few years,” said Diana Choyleva, chief economist at forecasting company Enodo Economics in London.Questions around the reliability of domestic data flared up under the country’s zero-Covid policy. In the absence of clear information from local authorities, traffic data was used as an indicator of the severity of citywide lockdowns. The government stopped publishing death data after a nationwide outbreak began. This month the province of Zhejiang released and then deleted figures showing a sharp rise in cremations.Carlos Casanova, senior economist for Asia at UBP, said he had been unable to access detailed data on local government land sales on Wind, a data platform, since its use outside the country was restricted this year. “If I were to guess, I would say the reason for that is that pockets of stress have appeared . . . and they don’t want the market to get too carried away,” he said.With the government tightening control on information, including a new data law that in many cases requires multinationals to split off their domestic and external data, fewer people are providing data of any kind. “When China Beige Book first got started, we had a multitude of competitors,” said Qazi, who testified before a US congressional committee on China this month regarding the country’s economic data. “Much of that has now disappeared.”Another economist working for an international investor, who asked to remain anonymous, said there was currently “less frank dialogue” within China and there were “some data constraints that are tightening”. That said, he doubted the government would disguise a growth shock. “They are sensitive to accusations that the data aren’t quite reliable,” he said. “[The government] would just have to print the numbers.”

A sense of slowing economic momentum in China has largely been based on the official data itself. The government has set a cautious growth target of 5 per cent, which Premier Li Qiang said in a speech last month the country was on course to achieve.Still, as China’s economy has proceeded to occupy a more significant position in a global context, there has been little corresponding development in its communications, analysts said. In its data release this week, the NBS said in a footnote that the revisions from its “seasonal adjustment model” related to month on month revisions for industrial enterprises, fixed asset investment and retail sales. It declined to comment further in response to a question on how the seasonal model works, and instead pointed to the release.“The national accounts data in China is still not produced in a way that we are familiar with in advanced economies,” said Kuijs. “In terms of accountability and transparency standards, you can go to [other countries] and ask them questions, and they are supposed to explain why did we change this.”Additional reporting by Andy Lin in Hong Kong More

The writer is a professor at Cornell, senior fellow at Brookings and author of ‘The Future of Money’With cash on its way out, many central banks around the world are experimenting with — or in some cases rolling out — retail central bank digital currencies. Their time may have come and they have many advantages over cash, but CBDCs also pose threats to the very institutions issuing them. Private digital payments are working well in many countries, limiting demand for CBDCs. Central banks face the challenge of making the latter viable in retail and peer-to-peer payments but not so successful that they displace private payments altogether. Consequently, the notion of a CBDC as the digital equivalent of cash, bearing a zero interest rate and with no special features, is giving way to the prospect of programming digital money for specific purposes. The possibilities are exciting. The Monetary Authority of Singapore’s recent white paper describes how such “purpose-bound money” can be designed to be “utilised for its intended purposes, such as validity within a certain period, at specific retailers, and in pre-determined denominations”.Doling out money with expiry dates could incentivise consumption. Government cash transfers in times of heightened uncertainty, such as Covid-19 stimulus payments, often go into savings, reducing their impact. Such money could be targeted even more precisely, say for purchases of durable goods, sharpening the economic potency of transfers. With cash gone, other options also come into play: imposing negative nominal interest rates to disincentivise saving and boost demand in periods of extreme economic distress. The programmable aspects of money could facilitate contractual arrangements, with funds automatically released only when conditions are met by all contracting parties. Such innovations open up new vistas of how money could improve the functioning of economies and societies. But it is worth reflecting on the darker sides of any new technology. Cash can be used anonymously and has a stable value (in nominal, not inflation-adjusted terms) relative to an economy’s unit of account, which is usually central bank-issued fiat currency. If units of central bank money with different characteristics were put in circulation, secondary markets for trading them become conceivable. People who prefer to save rather than spend might willingly trade their “programmable” money at a discount. Money held in CBDC digital wallets may be seen as safer than that in commercial bank deposits. After all, central banks never fail. A flight of money into CBDC wallets could decimate bank deposits and put central banks in the undesirable position of making credit allocation decisions. These risks can be limited. New cryptographic tools could restrict the use of CBDCs by unverified persons while allowing for privacy in low-value transactions. Capping balances in CBDC digital wallets would reduce the risk of deposit flight from banks. Legislative guardrails could prevent central banks from becoming too closely tied to government operations. Still, innovations in money do pose subtle risks. Central banks could be viewed as political agents if their visibility into payment transactions is used for law enforcement or surveillance purposes. “Helicopter drops” of money by the government into CBDC digital wallets are fiscal operations but in the public mind would become associated with central banks, causing these institutions to be seen as instruments of fiscal policy. In times of financial panic, caps on CBDC digital wallet balances could prove difficult to sustain, causing central banks to displace commercial ones as the main repository of an economy’s savings.What’s worse, authoritarian or even ostensibly benevolent governments could consider central bank money as a means to achieve their social objectives. They could prohibit its use for purchases of ammunition, illegal drugs, pornography, or for services such as abortions.Central banks already face threats to their independence, credibility and legitimacy. The more extensive the functionality of the money they issue, the greater the political pressures they will be exposed to. At a minimum, such innovations pose risks to the integrity of central bank money. It would be a sad irony if digitising central bank money to maintain its relevance undermines the very features that make it trustworthy. While they have little choice, central banks may well come to rue the day they embarked on upgrading their retail money.  More

The two sides in April began talks on a contract covering the company’s U.S. drivers, package handlers and loaders. An existing five-year labor pact expires on July 31. “With the contract expiration less than two weeks away, we need to work quickly to finalize a fair deal that provides certainty for our customers, our employees and businesses across the country, Atlanta-based UPS said on Saturday.A spokesperson for the International Brotherhood of Teamsters confirmed the Tuesday talks and pointed to a statement detailing its goals for a five-year agreement that increases pay and full-time jobs, and strengthens protections for workers. UPS said it hope to “resolve the few remaining open issues” at the talks. The company started negotiations “prepared to increase the already industry-leading pay and benefits we provide our full and part-time union employees and are committed to reaching an agreement that will do just that.”The two sides have reached tentative agreements on eliminating a two-tier pay structure for delivery drivers and putting air conditioning on package cars. However, they remain at odds over pay increases for part-time workers who sort packages and load trucks.Talks broke down on July 5 with each side blaming the other. More