September 18, 2019 / 5:03 AM / 10 months ago

Breakingviews - Pig crisis gives China a shot at transparency

Pigs are seen at a family farm in Fuyang, Anhui province, China July 5, 2019. REUTERS/Stringer ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. CHINA OUT. - RC1908D86140

HONG KONG (Reuters Breakingviews) - A porcine calamity has left China’s statistics looking muddier than ever. African swine fever has driven pork prices up by roughly half over the past year, according to the National Bureau of Statistics. Inflation remains in check regardless, prompting some charges that Beijing’s number-crunchers might be massaging the data. Other factors make that unlikely, but Beijing’s credibility deficit means a little transparency would go a long way.

The cost of China’s favourite meat has surged, and no wonder: African swine fever has slimmed the country’s pig herd by nearly 40% over the past year, crimping supply. Yet the headline consumer inflation rate is still just 2.8%, within the government’s 3% target.

It’s a discrepancy that has raised eyebrows. Analysts at Credit Suisse, for instance, noted in July that the juxtaposition of rising food prices, flat core inflation and steady headline inflation appeared “mechanically odd”. It might, they speculated, be the result of statisticians re-weighting components of the consumer basket used to calculate it. Pork is thought to account for 2% or 3% of that bundle, but no outsiders know for sure. Cynics have long suspected that tinkering with weightings is one way to keep the overall figure steady.

There’s little clear evidence of major tampering. All else being equal, the importance of food in China’s inflation basket should go down over time. That’s because as the country gets richer, households tend to spend more of their incomes on other things. Drawing on that, analysts at Capital Economics start with 2006 data and make their own estimate of how much weight food has in a typical basket today. They arrive at a little over a fifth, compared to about a third the past, and in line with the current data.

The crisis offers Beijing an excuse to settle the matter, by publishing the real proportions. It’s a modest step towards disclosure, but one that would boost credibility and demonstrate a willingness to learn from past mistakes. Officials can take other small steps to reassure sceptics, perhaps separating Ning Jizhe’s dual roles, for one. He is both head of the statistics agency and a high-ranking member of the state planner.

Until then, outsiders can be forgiven for taking China’s economic data with a healthy dose of salt.


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