Congenital Mythomania

Fake China data: was it just one province? 
Revelations Liaoning fabricated statistics raise questions over rest of rust belt 
By Lucy Hornby and Archie Zhang in Beijing and Jane Pong in Hong Kong

Sceptics about China’s economic statistics have taken a special pleasure in revelations of fake data in the north-eastern province of Liaoning dating at least to 2011.
Along with an officially reported contraction in its economy last year, they have given the impression that Liaoning’s economy is unusually troubled.
That impression may be unfair to Liaoning.
In 2007 when Li Keqiang was party secretary of Liaoning, he made waves when he declared China’s gross domestic product figures “man-made”. 
Last week, even Xi Jinping weighed in on Liaoning’s data-faking, telling the province’s delegation to China’s annual legislative meeting that “the practice must be stopped”.
But is Liaoning the only province to have doctored its statistics?
The map below shows the share of metals and mining (a category that includes crude oil output) in the nominal gross domestic product of Chinese provinces in 2011.
China stopped publishing this data in 2012, the same year the commodity cycle turned sour.

The FT examined four provinces that are more reliant than Liaoning on the coal, steel and oil industries.
Shanxi, Shaanxi and Inner Mongolia comprise China’s coal heartland; Liaoning and Hebei together account for almost one-third of China’s steel output. 
In regions where resources or steel dominate, the commodity cycle is more extreme.
Booms inflate the service sector, consumer spending and property prices; busts have an outsized effect on employment and government finances.
“China has a rust belt just like the US or UK,” says Andy Rothman, investment strategist at Matthews Asia. 
Below are coal, oil and steel prices since 2010.

These benchmarks were multiplied by each province’s reported output of coal, oil and steel, and charted against the reported growth in GDP.
Below is Liaoning.
Strangely, when it admitted to a contraction in 2016, steel, coal and oil were already recovering. 

The other provinces show a similar pattern in the three key industries.
Output values weakened in 2012, briefly recovered in the second half of 2013 and then took a deep dive.
Below is Hebei, home to one-quarter of Chinese steel production:

The worse period was the winter of 2015-2016, followed by a recovery in 2016, as seen below in Shaanxi...

and Inner Mongolia...

This pattern diverges from reported GDP figures, which show growth speeding up from early 2015. Below is Shanxi, the most mining-dependent of all Chinese provinces.
Metals and mining (mostly coal) made up 62 per cent of its industrial output in 2011 and 37 per cent of GDP.

Did Liaoning underperform last year, or were its reported data suddenly brought back in line with reality?
And what does that imply about the other rust-belt provinces?
“Liaoning is the most developed and diversified of the three north-eastern provinces, therefore it should have been performing better, not worse,” says Andrew Batson, economist at research group Gavekal Dragonomics.
In 2013 the Communist party pledged to implement a unified system for compiling provincial GDP. Rather than relying on provincial agencies to produce GDP figures in parallel with the national survey, the pledge called for the National Bureau of Statistics in Beijing to take charge of the process. The goal was to avoid the perennial problem of provincial GDPs summing up to a higher number than the national figure. 
NBS circulated a draft plan for the unified system in late 2014.
Ning Jizhe, director of NBS, told official media on Sunday that phase-in will begin in 2017 and be complete by 2020.
Observers must await the release of four years of corrected data from Liaoning — if indeed the true numbers are ever divulged — if they are to find out what really happened to northern China’s economy when the economic books were being cooked.

Plagues of China

Don’t Blame the Weather For China’s Smog
By Junfeng "Jim" Zhang

Like a Chinese dream

China’s air quality has been particularly bad so far this winter. 

Severe smog or haze episodes have occurred one after another with short breaks in between, affecting many parts of the world’s second largest economy, including some remote cities in the far west East Turkestan

Northern China has been hit hardest, with much of the national and international attention focusing in the Beijing-Tianjin-Hebei region.

Last week, Beijing issued its first-ever red alert for “fog” due to extremely low visibility caused by haze. 

The warning is the most severe pollution warning in the country’s four-tier system, resulting in school closures and flight cancellations and delays.
Haze and PM2.5 are perhaps the most commonly used words in China nowadays. PM2.5 is a term for tiny particles that can cause respiratory, cardiovascular, reproductive, and other health problems. High concentrations of agglomerated fine particles in the atmosphere are directly translated to decreased visibility or grey-ish sky. 

Hence, China counts the number of blue-sky days per year to assess progress made toward improved air quality.
Since Li Keqiang declared a war on air pollution in 2014, the Chinese Government released a set of aggressive air quality control regulations that aimed to reduce PM2.5 by 20% in five years. 

Annual average concentrations of PM2.5 have declined in the last three years. 

And this past summer, Beijing and other cities in China had more “blue sky” days than previous years. 

China’s government was pleased to see the effectiveness of its stricter emission standards on power plants and industrial facilities, but that sentiment quickly changed when a series of negative reports of haze emerged in the Fall of 2016.
It is, of course, convenient to blame the weather. 

No one knows better than Beijing residents about the importance of having northerly wind or a good rain to clean a sky filled with PM2.5 and gaseous pollutants. 

It is true that the atmospheric condition, with less precipitation and wind, is less favorable for pollutant dispersion in the winter than in the summer in the Beijing-Tianjin-Hubei region. 

This is an important contributor to worsened air quality in winter months in this region. 

However, this factor alone does not explain the frequent reoccurrence and very wide spread of haze episodes across China. 

Blaming weather for the problem may exasperate an already angry audience who might consider this an irresponsible excuse to the real cause of the problem.
The reality is that new regulations to curb pollution aren’t enough, and the latest alert signals that China’s government needs to do more. 

The January 4th 2017 issue of Economist presented data showing a hike in production output of crude steel, cement, and coke in the Beijing-Tianjin-Hebei region in the second half of 2016 compared to the same time period in 2015. 

The question remains whether the more stringent emission controls of these large industrial facilities are enough to offset the emissions resulting from increased industrial production.
As China’s economy grows in tandem with growing demands for energy, coal is still unfortunately the principal fuel for keeping homes and buildings warm in many parts of China beyond Beijing. Small-scale coal boilers and residential coal stoves in general have very poor combustion efficiency, emitting PM2.5, carbon monoxide, and other pollutants into the atmosphere, which can be visually seen as soot-laden smoke. 

These numerous and individually-owned combustion devices are hard to regulate for their emissions. In addition, as China continues to experience growth in both the number of privately-owned automobiles, there is every reason to believe that vehicular emissions have contributed to the air pollution problem as resident drive more.
Qualifying contributions of various sources to each haze episode has never been easy. 

While scientists are busy figuring out how water vapours from combustion sources, including natural gas and petroleum combustions, enhance the formation of PM2.5 and how emission-altered climate and weather conditions can in turn affect air quality, the message for policy actions is clear. 

It is a burning issue! 

Burning coal and other fossil fuels is the origin of the problem. 

There is a limit on how far today’s technology can go in terms of reducing emissions from coal. Without a significant reduction in coal consumption, especially when atmospheric conditions are unfavourable for pollutant dispersion, it would not be possible to see blue skies.
Although China has been increasingly investing in the production of renewable energy and cleaner energy, this winter’s severe haze problem sends a strong signal that the pace for replacing dirty energy is not fast enough. 

If all the efforts were targeted to large industrial facilities while leaving numerous small sources unchecked, one could only just sit and wait for mother nature’s power to blow away or wash out the dirty stuff pumped into the atmosphere by burning dirty fuels. 

China’s haze is truly a burning “burning issue.” 

Every effort should be made to reduce the burning of dirty fuels.