China could wave goodbye to its GDP data discord as the national statistics bureau chief claims that he will unify provincial and central GDP calculation methods and improve grassroots statistical quality this year.

Ma Jiantang, head of the National Bureau of Statistics (NBS), has criticized some local officials who inflate the GDP figures they report to the NBS. The problem has affected the nation’s statistical credibility and produced disunity between central and provincial data, Ma said.

The aggregate of the GDP figures reported by local governments reportedly is often larger than the overall national figure released by the NBS, arousing concerns that the local governments may have rigged the statistics to show how capable they are of managing local economy.

The new move by NBS is expected to change that, at least partially.(…)

According to the bureau, in the first half of 2009, the sum of provincial GDP figures exceeded the national GDP figure, calculated by the bureau independently, by more than 1.4 trillion yuan, or about 10 percent of the total GDP. In 2004, the difference was 3 trillion yuan, or 19.3 percent of the national GDP that year, which was the biggest gap in history.

Ma said that some provinces reported 18 to 20 percent year-on-year GDP growth amid the country’s economic slowdown in 2009. This has raised an alarm for statisticians, because the national GDP growth in that year was only 8.7 percent.

China will release quarter-on-quarter growth data this year, which will help monitor the economy’s short-term growth trend more effectively, Ma said. (…)

Full China Daily article



  • Obama Seeks Boost to Nuclear Energy: The Obama administration is planning to propose tripling a program that provides loan guarantees to construct nuclear reactors, an administration official said, aiming to reach out to Republican lawmakers in an effort to break a logjam over energy policy. (WSJ)

  • Obamatomic: After some initial uncertainty, it is becoming clear that the US president may do even more for atomic energy than his predecessor (FT)

  • Pinocchio President? By ALAN ABELSON Obama bashers are at it again. Stocks are sinking under a wave of good news.(WSJ)

  • Obama sets stage for fiscal retrenchment: President vows to pullback America’s $1,400bn fiscal deficit (FT)

  • Obama Outlines Plan to Increase Employment: The plan would give companies a tax credit of up to $5,000 for each new hire and reimburse them for Social Security taxes if they expand their payrolls. (NYT)


Paulson claims Russia tried to foment Fannie-Freddie crisis

Russia proposed to China that the two nations should sell Fannie Mae and Freddie Mac bonds in 2008 to force the US government to bail out the giant mortgage-finance companies, former US Treasury secretary Hank Paulson has claimed.

The allegation is in his memoir On the Brink in which he also suggests that Alistair Darling, the UK chancellor, blocked a rescue takeover of Lehman Brothers by Barclays Bank when he refused to support special treatment by UK regulators.

Mr Paulson said that he was told about the Russian plan when he was in Beijing for the Olympics in August 2008. Russia had gone to war with Georgia, a US ally, on August 8.(…)

“The Chinese had declined to go along with the disruptive scheme, but the report was deeply troubling,” he said. A senior Russian official told the Financial Times that he could not comment on the allegation.

Full FT article


Fed’s Kohn: Banks Need to Prepare for Higher Rates

Pretty clear warning. Read again WHEN THE FED STOPS THE MUSIC (II).

The Federal Reserve’s number-two official issued a stern warning to investors, banks and other financial institutions Friday: Don’t be complacent, interest rates are going up at some point and it will cause new market turmoil if you’re not prepared.

“We are in uncharted waters for monetary policy and the financial markets,”Donald Kohn, vice chairman of the Federal Reserve, said in a speech to bankers at the Federal Deposit Insurance Corporation. Rattling off a long list of uncertainties about the outlook – a rising budget deficit, foreign demand for U.S. debt, the strength of the recovery – Mr. Kohn said bankers need to start preparing now for the risk that interest rates could move swiftly in unexpected directions, most likely up.

“Many banks, thrifts, and credit unions may be exposed to an eventual increase in short-term interest rates,” he warned, adding that long-term interest rates could also be pushed higher, in part because large government borrowing to fund budget deficits could crowd out private borrowing. Foreign demand for U.S. debt could also narrow if countries with large trade surpluses shrink those surpluses and thus accumulate fewer dollars.(…)

Full WSJ article



Well, the first round goes to the “V”! Since last spring, economists have been debating on the shape of the recovery. Roubini saw a L, at best, while others said U, V or W. As Bespoke Investment chart shows, it is definitely not a L nor a U. The nice thing is that the debate will now be focused on fewer letters although other shapes will not doubt start to be invoked. How many W shapes are there?

While the ultimate pace of the economic rebound continues to be

GDP 012910

debated, GDP in the fourth quarter rose 5.7% (expectations were for growth of 4.6%), which was the fastest pace in six years.  Granted, this growth follows an even bigger decline of 6.4% in the first quarter of 2009, but at least it’s a start.  Judging by the performance of equities in the fourth quarter, and the earnings reports we’ve seen so far, we already knew the fourth quarter was strong, the big question is whether or not this growth will continue in Q1.  Based on what we’ve seen so far in terms of guidance, companies seem to have a positive outlook.

Meanwhile, David Rosenberg keeps whistling the same tune:

First, the report was dominated by a huge inventory adjustment — not the onset of a new inventory cycle, but a transitory realignment of stocks to sales. Excluding the inventory contribution, GDP would have advanced at a much more tepid 2.2% QoQ annual rate, not really that much better than the soft 1.5% reading in the third quarter.

Second, it was a tad strange to have had inventories contribute half to the GDP tally, and at the same time see import growth cut in half last quarter. Normally, inventory adds are at least partly fuelled by purchases of foreign-made inputs. Not this time. Strip out inventories and the foreign trade sector, we see that domestic demand growth in the fourth quarter actually slowed to a paltry 1.7% annual rate from 2.3% in the third quarter. Some recovery. (…)

Third, if you believe the GDP data — remember, there are more revisions to come — then you de facto must be of the view that productivity growth is soaring at over a 6% annual rate. No doubt productivity is rising — just look at the never-ending slate of layoff announcements. But we came off a cycle with no technological advance and no capital deepening, so it is hard to believe that productivity at this time is growing at a pace that is four times the historical norm.(…)