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Saturday, November 24, 2007

KMT Claims DPP Is Inventing Economic Growth Figures -UPDATED-

DPA (Deutsche Presse-Agentur GmbH), a German news service, came out with an appalling article on growth that simply regurgitates KMT claims on the economy without any context or countervailing evidence offered. The article reports the KMT attack on the government's growth figures.....

Taiwan on Friday released encouraging export figures but many Taiwanese are questioning the accuracy of the government's earlier economic figures.

The article is technically correct -- many Taiwanese probably do question the figures -- but nowhere does it note which Taiwanese or why. Note that by saying "many Taiwanese" rather than "the opposition KMT" in the opening frame, it creates the impression that this claim is neutral among election campaigns, though in reality, of course, it is an article of faith among KMT supporters. A few paragraphs further down, it says:

On Thursday, the central statistics office said Taiwan's gross domestic product (GDP) grew 6.92 per cent in the third quarter from a year earlier, marking the fastest pace in three years.

Some economists and government critics have questioned the accuracy of the government figure. In addition to the fact that many Taiwanese are out of work, the growth estimate is far bigger than the average year-on-year real GDP growth that Taiwan has posted over the last five years.

First, again observe -- the article says "some economists and government critics" without mentioning that this position is the position of the political opposition. The slanted framing should by now be very clear. How slanted is the framing? The terms KMT and opposition never appear.

"Many Taiwanese out of work"? But the latest unemployment numbers are below 4% and hiring is on the upswing, as the pro-KMT China Post reported the other day. Nor is there anything unusual about 5.46% growth. Here are the growth rates from DGBAS, using 2001 prices:

1997 6.59%
1998 4.55%
1999 5.75%
2000 5.77%
2001 -2.17%
2002 4.64%
2003 3.50%
2004 6.15%
2005 4.16%
2006 4.89% (since revised to 4.68%)
2007 5.46% (est)

In other words, if you look at the range of growth rates rather than the average for the last decade, 5.46% lies well within the range. But never mind that. All DPA had to do was cite countervailing independent evidence: the Bloomberg survey I blogged on earlier this week, a survey of 16 economists who work in international firms -- independent of the government, needless to say -- that pegged Taiwan's growth rate at 5.12%. The two figures differ by less than 7% -- if the DGBAS is making up numbers, it is doing so very conservatively.

DPA then commits what looks like a gross ethical breach:

Wei Duan, former director of the central statistics office, suspected the figure was fabricated to win votes in the upcoming presidential election.

Here Wei Duan is cited as a "former director of the central statistics office." That was in the late 1990s. Wei Duan is actually a KMT stalwart, a former member of the Party's Central Standing Committee from 1999-2000. In other words, the DPA cites him as an 'expert' without revealing that he is a KMT member with high rank. That strikes me as deeply unethical -- and par for the course for this piece.

The DPA then regurgitates the KMT election plank, without any observation that it is, indeed, part of an election platform, using loaded language:

In the 1970s and 1980s, Taiwan used to be one of Asia's Four Small Dragons, but Taiwan's economy has deteriorated due to Taipei's five- decade ban on sea and air links with China, the world's largest production base and consumer market.

The idea that the economy has "deteriorated" is pure KMT bullshit. Economic growth has slowed, only, but it is easy to sustain high growth when the economy is tiny and your patron power, the US, gives you every assistance in exporting to its own economy. As can be seen from the real GDP growth figures above, economic growth is clicking along at rates many nations would envy. Someday I'd like to see a media article that acknowledges that the DPP government is probably the most open to China in the history of the island. The real issue is that incomes are stagnant and prices are rising, and that is caused in part by the exodus of Taiwanese firms to China -- because the DPP is so open, especially compared to Taiwan's previous KMT governments.

The DPA soldiers on in the pro-China cause:

In recent years Taiwan has been further marginalized as foreign countries have signed joint free trade agreements (FTA) or formed free trade blocks to the exclusion of Taiwan for fear of angering China which sees Taiwan as a breakaway province.

Once again, we get how China sees Taiwan, but not how Taiwan sees China. Compare this more professionally done AP article, which adopts a more neutral tone in discussing the same issue, identifies the claim that the figures are bogus as an opposition claim, provides contextualizing information, and reports the claims of others, rather than incorporating them into its own presentation.

Nice work, DPA.

UPDATE: DGBAS says monthly wages are at a seven year high.

Regular monthly salaries of local wage earners in the country's service and industrial sectors averaged NT$36,676 (US$1,134.08) in the first nine months of this year, up 1.73 percent from the year-earlier level, an official said Saturday.

The amount marked a seven-year high, the official with the Directorate General of Budget, Accounting and Statistics (DGBAS) said.

Moreover, local wage earners' average regular monthly salary has continued rising for the past six quarters and consistently registered a more-than-1-percent year-on-year growth for the past 16 months in a row, the official said, adding that all these figures indicate a steady increase in their regular average salary.
UPDATE II: Anon adds in the comments below:

Hey Michael, there's a great weekly radio program that does very politically-neutral, very scholarly based explanations of hot economics in Taiwan. This week's program was about the whole South Korea vs Taiwan topic and rising prices.

Here's the link to this week's: mms://play.ccdntech.com/vod09/wma/6200711261910.wma
Here's a link to the archives:


27 comments:

  1. In the 1970s and 1980s, Taiwan used to be one of Asia's Four Small Dragons, but Taiwan's economy has deteriorated due to Taipei's five- decade ban on sea and air links with China, the world's largest production base and consumer market.

    hmmm, let's do some math. current regime terms = 2. therefore 50 years (five decades) - 8 years (2 terms) = 42 years where this policy existed under the previous regime. so why it is suddenly a problem now?

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  2. Seriously though, I would take all this with a grain of salt. I am not referring to the growth figures, I am just referring to the accusations that the figures are incorrect. The DPP did not invent the figures, although there will be many who think they did. But everyone, Taiwanese more than anyone, knows that it is a tradition in Taiwan to make big accusations such as these for political gain.

    I definitely think someone from the government needs to take the steam out of the nay sayers, but look on the bright side. This shows just how wounded the KMT feels by the economic news. They know that all they have to go on is the economy.

    It has always been my gut instinct that their own desperate drive to win back power could be enough to get them what they want. I genuinely think that a lot of blue Taiwanese will vote for Ma out of nostalgia and dislike for CSB than because they like Ma himself. But it just makes it a little harder for the party to paint a Ma victory as any sort of improvement over the current administration.

    The only thing Ma can offer is a kowtow to China and a wishy-washy style. The KMT would so like to express the contrary.

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  3. so why it is suddenly a problem now?

    Because China is becoming a gobal economic force??? You can get away with it I will say before 95 but after 1995, it is completely different story.

    Btw, CPI at 5.34%!!! I guess the growth is close to negative huh...or I read it wrong. China has about the same CPI but its GDP is at 11%. Btw, I believe in Taiwan's export number; however, it does not mean the money is distributed well.

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  4. Ummm..yes, you read it wrong. First, China's growth is not at 11% but at 6.5% or so. Independent studies of electricity consumption growth have demonstrated that all Chinese growth figures are inflated.

    Second, the number given here is real GDP growth, which is an inflation adjusted figure.

    Where does your CPI figure come from?

    Michael

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  5. You're attacking any who dare question the DPP-lead central statistics office figure of 6.92% growth for Taiwan in the 3rd quarter, while simultaneously ditching government figures, IMF figures, and the Economist's figures to claim that China's growing at 6.5%!!?

    Wow. I know you see weird things on blogs all the time, but I never expected to see someone claiming that Taiwan's economy was growing faster than China's, even for a single quarter.

    Also, Arty makes a good point. The world-wide trend is for much freer trade than even just 10 years ago. Saying that Taiwan has freer trade now than before, despite the fact that we restrict all direct links with the most important economy in the region, is meaningless.

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  6. "There are three kinds of lies: lies, damned lies, and statistics."

    This sort of thing is what politicians have always done, and Taiwan is certainly no different from the U.S. in that activity.

    Clinton talked about "the worst economy in 50 years" during his campaign against Bush '41. By looking at a few numbers and ignoring all the rest, that was a (sort of) correct comment -- much like a magician saying that he made the rabbit "disappear."

    Actually the AP

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  7. Ummm..yes, you read it wrong. First, China's growth is not at 11% but at 6.5% or so. Independent studies of electricity consumption growth have demonstrated that all Chinese growth figures are inflated.

    Yea, you mean the MIT dude's article. The 6.5% he mentioned is real growth. The 11% reported by China is nominal I believe. I look it again carefully, it looks like Taiwan is reporting the real GDP growth from the link you give us which is very interesting. Countries usually just give nominal. So I dig into their excel work sheet.

    Second, the number given here is real GDP growth, which is an inflation adjusted figure.

    Where does your CPI figure come from?


    I got it from the ROC stat website but it says change CPI figure. I guess it mean 1 year change from 2006. It is interesting that Taiwan's CPI is very small if you fix at 2001 but year to year change is 5.34%.

    Now I look at the excel worksheet supplied by the National Statistics. Can you answer me how could a country with over 4% REAL growth running at a deflated price for years. Yes, the GDP says that Taiwan's economy is fine. However, the CPI say it is not. Most of the 2000's CPIs are negative hence the real GDP is even up adjusted. I didn't realize that "in theory" you can have a positive GDP while having a deflation (I could be wrong). You can have thy opposite but we call it stagflation which is bad. Damn, I have to go check my economics text book.

    Btw, try to download the excel worksheet and check their math. I find it intersting.

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  8. You're attacking any who dare question the DPP-lead central statistics office figure of 6.92% growth for Taiwan in the 3rd quarter, while simultaneously ditching government figures, IMF figures, and the Economist's figures to claim that China's growing at 6.5%!!?

    Why yes. I'm ditching figures from the Chinese government (known to be invented), figures from the IMF (which have no provable origin, as we've discussed, and are therefore useless), and figures from popular news magazines, in favor of figures published in peer-reviewed economics journals.

    Yes, it certainly is insane of me to prefer independent analysis done by experts who have no investment in the numbers and rely on previously proven techniques. China's growth figures, while impressive, are inflated.

    Lester Throw has a short write up of the issues here. You are aware that China's growth claims were savaged before by analysts looking at electricity consumption growth rather than economic figures, right?

    I should add that I wouldn't have believed the DGBAS figure, had 16 economic analysts from different securities firms not said the same thing a few days before. That's ...um.... powerful evidence the DGBAS is not making things up for political reasons.

    And yes, I do respond to KMT attacks on the DPP. What's wrong with that?

    Saying that Taiwan has freer trade now than before, despite the fact that we restrict all direct links with the most important economy in the region, is meaningless.

    Mark, do we live in the same reality? I'm just checking. Was Taiwan trading with China in the 1970s? How about the 1980s? So do we have freer trade than before, or not? It seems sometimes that you have internalized your ideology so completely that it has become an analytical stance for you. Stop thinking in terms of free/unfree and start looking at reality, which for all nations means managed trade. Reality: in the 1970s there was no investment from Taiwan in China, in the 2000s, there is between $100 and $150 billion. Unless Chinese are engaging in telekinesis and stealing our industries, I'd say things are a lot freer now. Feel free to dispute that. The existence of restrictions, which all nations place on investment in foreign countries, does not mean that trade is not occurring.

    Once Taiwanese businesses were not permitted to invest in China. Now they can, whether or not they are restricted in doing so. For that matter, as I noted in the Korea thread, all nations that deal with China restrict and control their contact with that market. Of course, Taiwan has the additional complication that China has threatened to attack it, and seeks to subvert its independence and democracy, and that one of local parties is cooperating with it.

    Michael

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  9. Arty:

    Can you answer me how could a country with over 4% REAL growth running at a deflated price for years.

    But arty, we've had price inflation here for years....I don't understand your question.

    I did download the spreadsheet, but I think that's the wrong place to look. You have to look at their construction of the CPI. If there are any shenanigans, it's there.

    Really, it's not surprising that we have over 5% growth this year, given that the NT$ has followed the US$ downhill, and our big export market of China has excellent growth, and it is Xmas in the US. I suspect we'll see a big drop come January, and the paper said the other day that no one has revised their 2008 growth estimates upward.

    Michael

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  10. BTW Mark, you read about the disputes from the late 1990s. Note that IMF, which for some inexplicable reason you think is a good source of numbers, gets busted for its uncritical adherence to bad numbers.

    IMF defense of China's numbers

    We've been through this before with China. The more authoritarian the government, the less trustworthy the numbers.

    Michael

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  11. It has always been my gut instinct that their own desperate drive to win back power could be enough to get them what they want. I genuinely think that a lot of blue Taiwanese will vote for Ma out of nostalgia and dislike for CSB than because they like Ma himself.


    They might win. My assessment of Hsieh's chances fell when CSB became Chair of the DPP. What a stupid move that was. But there is plenty of campaigning to go, and either side could destroy itself. In the end, I think Hsieh will win simply because he's all around better than Ma, and a better alternative than CSB. Remember, the election is not between CSB and Ma, even though the KMT seems to think it is.

    Michael

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  12. I should add that the number I gave for China is off the cuff. It could be higher, for sure. That's why I said "6.5% or so." All we know for sure is that China inflates its growth figures. Difficult to tell by how much.

    Michael

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  13. But arty, we've had price inflation here for years....I don't understand your question.

    Really, Micheal, here is the link to the CPI pre-year from your source.

    http://eng.stat.gov.tw/public/data/dgbas03/bs4/ninews_e/t01.xls

    This one shown that after 2000, you pretty much has a deflation while GDP is growthing. You see the real GDP is higher than unadjusted until this year.

    http://eng.stat.gov.tw/public/Attachment/752416385771.xls

    Also, this one. You can see that GDP is adjusted upward based on CPI. For last few years, Taiwan has a deflation yet GDP is expanding. I am simply to point out that it is almost "theoretically" impossible. I could be wrong though.

    Btw, the GDP will be downward adjusted for sure. I shorted etrade and Countrywide, I am happy.

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  14. Oh by the way, is Taiwan ready to get kick of WTO?

    http://news.bbc.co.uk/2/hi/asia-pacific/7102347.stm

    P.O. everyone is not a good thing.

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  15. Oh, now I see what you're saying. You mean the growth rate for nominal GDP is lower than the growth rate for real GDP. That's not the same as "deflation". I thought you were claiming the inflation rate was negative -- prices were deflating. That's clearly not the case.

    Yup, you're right. The GDP deflator for many of these years appears to be negative. this paper has a list but the table is hard to read in that format. I think it is related to using 2001 as the base year.

    Comments?

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  16. I don't know Michael, using negative deflator which I think is CPI (or at least majority of it should be). Just doesn't look good. There are two years clearly has negative CPI yet the GDP has grown which is kind of weird.

    I guess we will see how people felt during the election :). Is it "really economics stupid?"

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  17. Arty, they aren't using a "negative" deflator.... What's happened is that when you do real GDP calculations you standardize the production back to the base year, you don't calculate by subtracting the inflation from nominal GDP each year. So the hidden effect is that inflation in the base year = 0, regardless of what the actual number is. So in relation to base year price levels, subsequent year price levels may have been lower, resulting in a negative GDP deflator -- one in which price levels were like 98 or 96, lower than the base year, even though prices are inflating in any one subsequent year. GDP is actually relative to a particular selected year.

    I think that's what the problem is. They also use import and export deflators, so they may be some kind of secondary deflating away of the effect of rising prices for energy. But I'm just speculating.

    Michael

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  18. Michael, of course I'm not saying Taiwan is less open than it was. What I'm saying is that the entire world is more globalized than it was. In the 1970's restrictive trade policies were the norm. Now, things are quite a bit different.
    Why yes. I'm ditching figures from the Chinese government (known to be invented), figures from the IMF (which have no provable origin, as we've discussed, and are therefore useless), and figures from popular news magazines, in favor of figures published in peer-reviewed economics journals.

    "Yes, it certainly is insane of me to prefer independent analysis done by experts who have no investment in the numbers and rely on previously proven techniques. China's growth figures, while impressive, are inflated."

    I wouldn't go so far as to say it's insane, but your position is in the minority view, even amongst the experts. It's possible that most of the world is wrong and that China's actually not growing as fast as Korea, Brazil, India or some other countries, but my money's on China.

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  19. Michael, of course I'm not saying Taiwan is less open than it was. What I'm saying is that the entire world is more globalized than it was. In the 1970's restrictive trade policies were the norm. Now, things are quite a bit different.

    So we agree that Taiwan has freer trade with China than it used to. What exactly is our disagreement about?

    Michael

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  20. I wouldn't go so far as to say it's insane, but your position is in the minority view, even amongst the experts. It's possible that most of the world is wrong and that China's actually not growing as fast as Korea, Brazil, India or some other countries, but my money's on China.

    Well, all I know is that the published figures overstate China's growth, a repeated experience in dealing with China. How that compares to Korea -- do you have real GDP numbers? or Brazil or India is difficult to say -- since we know the Chinese figures are overstated, it wouldn't be surprising that India's economy, clicking along at 9.2% a year and 8% for the last couple of years, is at China's levels. The Economist has a story just this week on it. As for Brazil, isn't clunking along at under 5%? Nothing compared to India or China. As for South Korea, the CIA says 4.8% in '06, so clearly not close to any Chinese number, either 6 or 7 or 8 or 9 or 10 percent. Hey, any of those figures are impressive growth.

    Michael

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  21. Hi Micheal,

    I don't know why Taiwan keeps reporting real GDP when everyone else is reporting nominal (because it always look better). If you look at US data, it doesn't have deflators, and the data usually quoted in the news is the nominal one with current dollar not real.

    Here is the worksheet

    http://www.bea.gov/national/xls/gdpchg.xls

    Also, you will notice that no current dollars one is less then the real one since 1930 except one becuase it is almost "impossible." I could be wrong though what do I know. Also, do you know which years in the US economy we saw the "impossible?" It was 1939 when people were jumping out of windows.

    Btw, how do you covert current dollars to the real dollars? You adjusted it with CPI.

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  22. "Remember, the election is not between CSB and Ma, even though the KMT seems to think it is."

    This I know. But do the voters? Perception is everything, and Chen is not doing a good job at not upstaging Hsieh.

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  23. Thomas said...

    "This I know. But do the voters? Perception is everything, and Chen is not doing a good job at not upstaging Hsieh."

    Maybe Chen really IS saying and doing whatever the hell he wants, but maybe, too, the plan is for Hsieh to finally "put Chen in his place." The benefits of such a possible strategy are obvious: Hsieh can do what the blues have wanted but failed to do (slay the rube-ghost Chen); Hsieh gets tough when patience shows there's no other choice (and in a harmony-based society, you had better wait a good long time before you decide "no other choice" and therefore get tough [unless you're a Westerner... but better to keep my pet personal opinions out of this]); and most of all, Hsieh kicks ass within the top rank of his own party in a way Ma wouldn't dare do within the KMT -- all of which totals exactly the kind of guy Taiwanese would want to manage "opening up more" to China.

    Two times would work quite well for Hsieh to "turn" on Chen: right before and right after the legislative elections in mid-January. A good strategy would be for Hsieh to express displeasure
    before the elections, and then "go for Chen's throat" after the DPP gets creamed.

    Notice how Chen really didn't interfere much on behalf of his boy Yu in the DPP primary. And notice how silent Su has been in all of this -- and that even Yu is relatively silent. And how even Veep Lu is arguably in sync with this scenario. The hush on this within the intra-party-querulous DPP seems deafening. Is this really a party riven?

    For seven years, Chen has kept his virtues well-hidden, which is really, really too bad for Taiwan. Who knows? Maybe he's really that much in charge that he can decide to be Nero and tear ass around, saying and doing anything he wants. But isn't a different scenario more plausible? Maybe his only real virtue is that he's truly a team player; maybe he's doing his very best right now.

    And maybe I'm completely missing the boat here.

    Anyway, however things play out is going to be interesting. Sooner or later, Hsieh has to make a move, no matter if it's real or staged.

    ReplyDelete
  24. Hey Michael, there's a great weekly radio program that does very politically-neutral, very scholarly based explanations of hot economics in Taiwan. This week's program was about the whole South Korea vs Taiwan topic and rising prices. Your Chinese seems to be good, please do check it out.

    Economics isn't necessarily easy to understand so I don't blame Arty and Mark for being misled by a lot of these numbers, but sound economic analysis does prove them wrong.

    Here's the link to this week's: mms://play.ccdntech.com/vod09/wma/6200711261910.wma
    Here's a link to the archives:
    http://www.rti.org.tw/Program/ProgramContent.aspx?ProgId=35&NetId=1&UnitId=0&LangId=1

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  25. Regarding China's inflated growth figures, there's this yesterday from the latest ("China's Economic Plan: Blame U.S.") in the always-worthwhile Jim Jubak's ongoing China focus at MSN Money:

    "China's official economic numbers are notoriously unreliable. Just this summer, for example, the Asian Development Bank reported that China's economy is a tad smaller than previously reported -- roughly 40% smaller. And that the number of Chinese living on less than $1 a day is about 300 million, roughly three times above previous estimates.

    The reason for the revisions? Chinese officials finally got around to providing accurate price data that the bank needed to calculate how big a boost lower prices in China have given to Chinese living standards. Thanks to inflation, the increase in purchasing power wasn't nearly as large as had been believed."

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  26. Hahaha. Just a 40% error. Thanks, man.

    Michael

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  27. Well there is one way all of us can definately find out if this accusations are true and that is if we vote the KMT into Taiwan's highest office - Then these records can be detailed properly without the "communist like" continuation of the DPP's one party rule - Which will continue if reelected.

    ReplyDelete

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