China’s Beige Book exhibits why official statistics can’t be trusted

Two weeks back I expressed doubts on the supposed recovery of the Chinese economy as partly a statistical mirage. I noted

I am not comfortable with statistics from the Chinese government in the recognition of the hiding, censoring and editing of data which has not fitted with the government’s agenda

Well more signs that the Chinese government has been data mining their economic figures

From Bloomberg (bold mine, hat tip zero hedge)

China’s economy slowed this quarter as growth in manufacturing and transportation weakened in contrast with official signs of an expansion pickup, a private survey showed.

Increases in business-investment and real estate revenue also slowed, while service industries picked up and employees became tougher to find, the survey from New York-based China Beige Book International said yesterday. The report is based on responses from 2,000 people from Aug. 12 to Sept. 4 as well as 32 in-depth interviews conducted later in September.

The quarterly report, which began last year and is modeled on the U.S. Federal Reserve’s Beige Book business survey, diverges from government figures showing faster factory-output gains in July and August that have spurred analysts from Citigroup Inc. to Deutsche Bank AG to raise expansion estimates. Nomura Holdings Inc. is among banks skeptical that any rebound will be sustained next year.

The results “show the conventional wisdom of a renewed, strong economic expansion in China to be seriously flawed,” China Beige Book President Leland Miller and Craig Charney, research and polling director, said in a statement.

The data “reveal weakening gains in profits, revenues, wages, employment and prices, all showing slipping growth on-quarter -- no disaster, but certainly not the powerful expansion suggested by the consensus narrative.”

It seems that the recent rise in China’s equity markets, as measured by the Shanghai Index, may have been designed as part of the campaign to create the impression of ‘recovery’. 

I say designed because the Shanghai index recently experienced a “flash spike” which the government blamed on fat finger (trading error) by a state owned firm rather than from what I suspect as a botched attempt at manipulation.

And copper has not chimed with a supposed recovery in China’s fixed investment

Nonetheless whatever stealth stimulus--that the government has been applying to boost her statistical economy that will lead to more debt--is likely to be limited.

That's because rising yields of 10 year China’s sovereign bond are likely to impact her already precarious debt position.