Following China’s Path of Least Statistical Resistance

Thursday, August 13, 2009 23:32
Posted in category Uncategorized

As an 21 year old undergraduate studying statistics back in the Great State of Missouri, I learned early on that statistics was in many was part art and science.That, while there could be a positive correlation between two sets of data in a vacuum, the inclusion of a third data set may alter or completely remove that correlation. Which simply opens doors for those who wish to construct data sets and “scientific conclusions” to support their needs.

In China, my first exposure to this was while working on a project in China’s second tier markets where we were developing a model that was heavily tied to “standard macroeconomic” statistics of each city. Myself and several team members spent a couple of weeks in libraries, talking to local Statistics Bureaus, and then trying to develop the context through which to present the numbers. It was an arduous process at times, comical at others, but a process that everyone on the team learned a great deal from… and go on to apply.

It is an issue that I run into personally and professionally on what seems to be an ever frequent basis, and while the recent FT article China’s growth figures fail to add updoes an excellent job of pointing out that a 5th grader with an abacus would have seen a problem with the recently reported growth figures, the problems go far wider.

Through the article, the point that the gap is largely a result of competiting needs and interests is perhaps THE KEY ISSUE. That in many ways it is the structure of China’s reporting that is to blame as local mayors look to impress their bosses, who will in turn look to impress their bosses, who will in turn look to impress their bosses, and so forth. IT is a process that only looks forward to to brighter futures, and rarely takes the time to accept the fact that gravity exists and that it is impossible that EVERYONE EVERY YEAR will see positive gains. That sometimes, to no ones fault, things do roll the other way or that a negative may be a sign of something that (if addressed) can be turned into a positive very quickly.

Two examples of this have on a personal level come to reflect this.

The first resulted from the growing number of stories where airline passengers in China were loosing their cool, and the resulting steps that the powers to be took get airlines to address to the problems.Essentially ordering airlines to reduce departure delays, many found easy enough to manage through a simple procedure of loading up passengers on flights and then announcing the delay once everyone was safely locked inside. A process that I now experience nearly every time I get onto a plane now. Nothing has improved but the statistics through these actions, and customers did not benefit, however the statistics now show more on time push backs and thus the airlines are able to report back to their superiors nothing but good things.

The second example showed itself while riding around with a couple of friends in Beijing. They were lamenting the fact little had changed in Beijing’s traffic with the new rules, statements that seemed to defy the logic of rules that now keep 20% of Beijing’s cars off the road on any given day.  A few more minutes, and it became clear that little had changed in reality (for the good) as people were simply buying second cars to circumvent the restrictions. A windfall for GM, but again, another perfect example of how the statistics failed to reflect the conditions on the ground.

Just two of the most recent examples that I personally epxerienced, both show that it is very easy to misread China should one just rely on published reports, and that statistics can often fail to provide an accurate picture of what is going on when taken out of their proper context.

so, before believing that GM announcement that sales are meant to continue increasing at their current pace (like they did several month after SARS), perhaps it is best to look a bit deeper into the primary market drivers, and take a wider view on what the sustainability of those drivers are.  Same goes for real estate, same goes for solar stocks, and the same goes for entering China’s retail market

Both comments and pings are currently closed.

One Response to “Following China’s Path of Least Statistical Resistance”

  1. ShaMao says:

    September 8th, 2009 at 7:28 pm

    Having worked for over 4 years assisting foreign companies in China with internal audit / compliance type work, I think that I can honestly say that I never came across a single company where local managers were not actively manipulating metrics and KPIs for their own purposes. I can only imagine how much worse it must be in Chinese owned businesses and the public sector.