In my wanderings around the Wall Street/academic white-collar/white-shoe manors of today’s economy, I always marvel at the persuasiveness of a mere number and attendant
squiggle graph. It is sometimes hard to realize that every number contains at least as much opinion as your average bilious op-ed grammatical construct. Just because mathematics is the preferred religion on Wall Street doesn’t mean that numbers shouldn’t be treated with at least as much skepticism as a qualitative judgment.
Case in point: this howler.
In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China’s economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China’s size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China’s economy will turn out to be 40 per cent smaller than previously stated. …
Why such a large revision in the estimates of China’s economic condition? Until recently, China had never participated in the careful price surveys needed to convert accurately its gross domestic product into PPP dollars.
(hat tip to Steve Roman)
I wonder if there’s anyone who knows anything about China’s economy, beyond the sewage disgorged by the PRC Statistics Bureau. GaveKal is a very smart group of guys that give it a good try, but they live in a much more optimistic universe than I do, and their estimates make no sense whatsoever to me. (Their recent economic forecasts, by the way, have been very badly off.)
And before your jaw drops at how out-of-bounds the magnitude of this “revision” is, it was less than two years ago that China published a 17% one-off upward revision to its GDP.