No one likes bad news. It can ruin a morning. It changes how we think about our targets, goals or strategies, be they personal or business. Hearing bad news makes one think, as we complained as children, “that’s not fair”. But as my mother used to say, “life isn’t fair.”
People and businesses across China face many sources of worrying economic news today. Whether it is the price of a flat, the plans of university-educated young people or shifting business decisions, this news involves sectors essential for the economic turnaround for which China and its trading partners are hoping.
Yet when times are tough, frankness about the nature of economic difficulties a country faces is a virtue, not something to be obscured. Political leaders will spin the news and what the economic data means to provide the best possible picture. That is normal.
What leaders, economists, policymakers and central bankers should not do is hide reality or shy away from the data that illuminates the real story as it unfolds. Unfortunately, at this juncture that appears to be what is happening to some key data in China.
For example, official youth unemployment data is currently unavailable after a series of high numbers appears to have moved China’s economists to stop releasing the numbers and recalibrate. If this data remains unpublished, it will obscure the reality faced by many job applicants, which will have distortive effects.
Job applicants might get the wrong impression of the market, holding out for an information technology job they want instead of the manufacturing job that needs filling. Obscuring unemployment numbers also makes life harder for CEOs. Planning business growth strategies when a firm does not know the state of the job market undermines its ability to forecast and adjust accordingly for demand shifts and new opportunities.
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The reasons behind China’s high youth unemployment rate
The reasons behind China’s high youth unemployment rate
External economists are looking at gross domestic product, trade flows and other economic indicators and are perplexed. In some cases, there is marked divergence between export trade data, domestic and foreign. Which should businesses believe?
Worries about the reliability of economic data are increasing. Some foreign media outlets have raised questions about reported differences between headlines and detailed real estate sales data. Just how bad is the real estate market? Which data can they rely on? The result of this uncertainty is that investors are finding it increasingly difficult to make informed judgments about China’s economy and its direction.
Suppose opacity and worries over data build and commercial doubt and uncertainty continue, or even worsen. This could gradually undermine investors’ ability to make decisions on when and how to invest in China. This would affect domestic firms or the foreign direct investment that the country still needs and which President Xi Jinping has underscored is welcome.
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US National Security Adivsor Jake Sullivan has emphasised that, saying: “For global confidence, predictability and the capacity of the rest of the world to make sound economic decisions, it’s important for China to maintain a level of transparency in the publication of its data.”
Sullivan is right. It is in China’s best interest to be transparent on the economic data and keep it credible. That data allows markets to operate, firms to adjust and seize opportunities and consumers to respond with their choices and decisions.
It is here that the role of senior technocrats in the People’s Bank of China, the National Bureau of Statistics and other agencies tasked with reporting on the economy is crucial. Officials should stand firm if they face demands to bend data towards a particular narrative. Data is data. Defend it so everyone can make their own informed judgments.
Let’s look at two external examples – one recent and one historical – when leaders’ responses to data was problematic. Last year, the UK market panicked and a run on the pound resulted when the then-chancellor of exchequer Kwasi Kwarteng failed to publish analyses of his proposed mini budget and large tax cuts from the Office of Budget Responsibility. This miscommunication and market reaction ultimately led the prime minister, Liz Truss, to resign.
Then-British Prime Minister Liz Truss and Chancellor Kwasi Kwarteng (second left) react during a visit to a construction site in Birmingham, England, on October 4, 2022. Photo: AP
Or consider an embarrassing American case. In 1971, US president Richard Nixon was upset over employment data, which he saw as negative for his administration. Nixon responded by tasking a senior aide, Frederick Malek, to identify what he viewed as a “Jewish cabal” in the Bureau of Labour Statistics and senior professional economists were unjustly fired. The Nixon Tapes and National Archives confirm this sad episode.
To be sure, China’s statistical and data problems are not of the scale or form of these shocking examples. Nonetheless, economists know, and business leaders understand, that decision-making is impossible without regularly reported, credible and reliable data which is transparently produced and based on understood norms and practices. Political leaders also need good data to make their decisions.
Excessive opacity does not help. In fact, it could undermine desired outcomes as actors in the economy respond to increased uncertainty with timidity or a refusal to plan for a better tomorrow.
Leaders should also remember that citizens understand that sometimes life can be tough, even unfair. It is better to be frank with the data as not doing so could make economic recovery harder than it might otherwise have been.
Stuart P.M. Mackintosh is executive director of the Group of Thirty
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