By Bloomberg News – Jun 11, 2010
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The People’s Bank of China stands in Beijing. Photographer: Nelson Ching/Bloomberg
June 11 (Bloomberg) — Ben Simpfendorfer, chief China economist at Royal Bank of Scotland Group Plc, talks with Bloomberg’s Deirdre Bolton about China’s inflation and economic growth. China’s inflation accelerated to an annual 3.1 percent pace in May, surpassing officials’ target for the full year. Simpfendorfer also discusses the outlook for yuan policy. (Source: Bloomberg)
China’s government said it would investigate a leak of economic data this week that triggered a surge in stocks around the world.
“The National Bureau of Statistics very much condemns such acts of leaking core data that are still in the confidentiality period,” Sheng Laiyun, a spokesman for the office, said in Beijing yesterday. Reuters on June 9 reported figures for exports, consumer prices and new loans, citing three people who heard them from a government official at an investor conference. Official releases in the following two days matched or were close to the numbers.
The reported data, which exceeded forecasts, spurred the biggest gain in the benchmark Chinese share index in two weeks and set off a stock rally from Europe to the U.S., highlighting China’s role as the fastest-growing major economy. Selective disclosure risks feeding speculation and undermining investor confidence, said Peng Wensheng at Barclays Capital.
“It’s not good for the market and not good for the government’s credibility,” said Peng, head of China research at Barclays Capital in Hong Kong and former chief of China affairs at the Hong Kong Monetary Authority. “It’s definitely not good for any data to come out before they are released.”
Reuters said that exports rose about 50 percent in May, consumer prices climbed 3.1 percent, and new loans were 630 billion yuan ($92 billion). The Shanghai Composite Index jumped 2.8 percent, followed by a 1.9 percent gain in the Stoxx Europe 600 Index. The Standard & Poor’s 500 index advanced as much as 1.5 percent June 9 before closing lower.
‘Years’ to Go
“Markets are paying attention to China as never before,” said David Cohen, an economist at Action Economics in Singapore who previously worked at the Federal Reserve Board of Governors in Washington. “The Chinese government will understand the need for a more disciplined release of data, but it may take a few years to get up to the standards of Japan, Europe and the U.S.”
Besides the Reuters article, news service Market News International reported on June 9 figures including inflation, industrial output, retail sales and new loans, citing “rumors in the bond market.” Most of the numbers proved accurate, with the increase in fixed-asset investments at 25.6 percent comparing with the actual 25.9 percent.
Market News “does not handle leaked Chinese government data,” John Carter, Asia managing editor, said in an e-mail. When it published the numbers, Market News said: “Data often leaks into the market ahead of the official release, with varying degrees of accuracy.”
Reuters, part of Thomson Reuters Corp., declined to comment on the matter. Bloomberg LP, the parent of Bloomberg News, competes with Reuters in selling financial and legal information and trading systems.
China concentrates publication of monthly figures into a few days, with the main data being released by the statistics office, central bank and customs bureau. The People’s Bank of China and customs bureau declined to comment on the leaks.
“We have noticed that before the data release this time, certain media in advance reported the data,” Sheng of the statistics office said in a press briefing yesterday to release figures on industrial production and other data. The agency is, “in accordance with relevant rules and procedures, further examining and handling this issue,” he said.
It’s not the first time that Chinese data has appeared early. The Beijing Times newspaper cited gross domestic product figures from an unidentified person at the statistics bureau on July 16, 2009, hours ahead of the official dissemination. China Business News on Jan. 21 also had GDP data before the release. Shanghai Securities News revealed consumer price index information on Jan. 22, 2009.
“Whenever this happens, some insider is getting in ahead of the rest of the market,” said Cohen at Action Economics, a research company that offers analysis on markets and the economy.
The information office for China’s State Council, which is equivalent to the U.S. cabinet, declined to comment.
Developed economies aren’t immune to issues with their own data releases. In 2004, U.S. officials probed unusual trading in Treasury securities a minute before news organizations transmitted monthly employment data.
In 2007, the U.S. Labor Department said that it had tightened procedures and that moves in financial markets before a jobs report could have been “arbitrary speculation.”
In another case, on Oct. 31, 2001, news of the U.S. Treasury Department’s plan to suspend sales of 30-year bonds was leaked to some market participants, including Goldman Sachs Group Inc., before it was disseminated widely through media organizations.
China’s data are getting greater scrutiny as the country’s economic weight rises in the world. It’s projected to overtake Japan this year as the world’s second-largest economy, behind the U.S.
Chinese export data have implications for the nation’s currency policy, a point of contention with the U.S. highlighted by Treasury Secretary Timothy F. Geithner in a congressional hearing June 10.
Evidence of economic strength can also alter investors’ bets on the commodities required to drive a Chinese gross domestic product gain estimated by the World Bank at 9.5 percent this year. By comparison, U.S. growth is seen at 3.3 percent, with the euro region expanding 0.7 percent.
“Economic data such as consumer prices is worth its weight in gold if you get it before the official release as they can affect decisions on interest rates,” said Wang Weijun, a Shanghai-based strategist at Zheshang Securities Co. “This is especially so if the actual figure is significantly different from the market consensus.”
The set of June economic data is mainly scheduled for release during the week of July 12. Several of the main Chinese economic indicators lack pre-set release times, such as monthly lending figures, foreign direct investment and property prices. Monetary-policy decisions also don’t adhere to a fixed schedule.
China should aim to release economic data and key policy decisions in a more regular and predictable manner, said Kevin Lai, a Hong Kong-based economist at Daiwa Capital Markets. This month’s data dissemination was “disastrous” and left room “for market manipulation,” he said.
–Paul Panckhurst, Stephanie Phang, Patricia Lui, Kongho Chua. Editors: Chris Anstey, Christopher Wellisz
To contact Bloomberg News staff for this story: Paul Panckhurst in Beijing at +86-10-6649-7574 or firstname.lastname@example.org