China economy

Beijing says Guangdong government broke law by publishing PMI economic figures for seven years

  • As trade war bites, National Bureau of Statistics bans provincial purchasing managers’ index, saying local authorities did not have approval to publish it
  • Monthly gauge had been in existence for seven years and was regarded by analysts as an important indicator of economic conditions in export hub
PUBLISHED : Wednesday, 19 December, 2018, 6:02pm
UPDATED : Wednesday, 19 December, 2018, 9:27pm

Authorities in China’s export hub, Guangdong, were ordered to stop producing a monthly economic index because they were breaking the law by doing so, the central government said on Tuesday.

The National Bureau of Statistics (NBS) said in a statement on its website that the provincial purchasing managers’ index was produced without its permission and therefore broke China’s statistics law.

The bureau received reports from “unidentified sources at the end of October that Guangdong is releasing the purchasing managers’ index (PMI) without approval” and ordered it to cease, it said.

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“From a legal point of view, the purchasing managers’ survey conducted by the Guangdong Department of Industry and Information Technology was an illegal activity and we’ve demanded that the Guangdong statistics authority resolve the matter in accordance with relevant laws and regulations.”

The move came as a surprise to many industry watchers and analysts as authorities in the province had been producing the monthly gauge since 2011. The most recent figures, for September activity, were published at the start of October.

The NBS said that while the statistics authority in Guangdong had initially been granted approval to publish the data, that permission had expired. It did not give an expiration date.

However, it said Guangdong could resume production of its monthly PMI once it complied with the proper procedures and obtained approval of its methods from the national authorities.

The order to cease production of the index came as Beijing is tightening its control over the narrative of China’s economic performance as the impact of the trade war with the US intensifies.

The gauge is considered an important indicator as Guangdong is the country’s export hub and therefore on the front line of the trade war.

“The PMI is a key economic indicator for the market, and any move to tighten [control over] it would affect the confidence of the market and enterprises,” said Shen Jianguang, JD Finance’s chief economist.

“The mainland economy is under pressure, as we see consumer and factory data are very weak. Actual private sector and consumer demand is weakening. The absence of the economic data would only exacerbate suspicion [about the true condition of the economy].”

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Xu Jianwei, a senior China economist at French bank Natixis, said the suspension of Guangdong PMI could be part of Beijing’s broad campaign of tidying up the nationwide statistics system and more rigidly adhere to regulations that were already in place.

In October 2017, China issued a notice saying that the calculation of provincial economic figures would be conducted by the NBS rather than local authorities as of 2019 to reduce inconsistencies between the two sets of figures for gross domestic product.

“The previous implementation of regulations was lax,” Xu said. “Now the government is trying to implement existing rules. But the government is not good at communicating with the public, and it has certainly caused confusion and speculation in the process.”

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Guangdong is not the only Chinese province to have produced economic indicators, but it has been the most consistent in doing so.

Authorities in Shanghai began publishing a PMI in 2011 but discontinued it the following year, while the same thing happened in central China’s Hunan province, which published its first such gauge in 2014 and withdrew it in 2015.

The three other cities to have discontinued PMIs are Foshan and Guangzhou, both in Guangdong, which stopped doing so in October; and Nantong, in Jiangsu province, which published figures from 2013 to 2017.

Suzhou, which is also in Jiangsu and another major export base, still publishes a PMI for its manufacturing sector. The index fell to 48.5 in November, indicating a contraction in economic activity.