Chinese Real Estate Bubble Confusion (Or "On The Frailty of Selective Information")

(Updated to include the overall local-national GDP discrepancy of at least ~2.5%.)

We often see headlines loudly proclaiming certain things to be true about China.  They are taking over!  No, wait, they are collapsing!  It's raining!  No, it's a drought!  How is one supposed to make sense of any of this?

One small part of the answer is that even the Chinese don't have a great idea of what is going on.  As a result, last Thursday (March 11), based on Chinese government data, the Financial Times and the Wall Street Journal carried stories on the state of the Chinese real-estate market that came to completely opposite conclusions.  Here's the WSJ headline: "China's Real-Estate Boom Appears to Cool."  And here is the FT: "Fears grow over China property bubble despite efforts at cooling."  Both stories cite identical statistics about price increases over the last year, though the WSJ leans on reduced sales volumes reported by the Government and by a consultancy that tracks sales.  (Imagine this, if you can -- a reduction from 50% to 37% in the annual increase in sales is seen as a "cooling" of the market!)

The main problem with this reporting is that there is very little reason to believe the underlying data is accurate.  See, for example, this story from Xinhua a few weeks ago: "China statistics chief admits errors in property data calculation".

Dueto staff shortages, housing price data mainly stemmed from reports by real estate developers, said [Ma Jiantang, director of the National Bureau of Statistics (NBS)], who cited Beijing as an example where only one or two officials were responsible for collecting data from hundreds of real estate companies.

"Under the circumstance, we have to rely on the employees of property companies after giving them short-term training," Ma said. "And some of the employees lack professionalism and a sense of responsibility."

And of course the real-estate developers have every reason to want the government (and the public) to conclude that prices are not out of control.  Beijing is attempting to put the breaks on a housing bubble, but the developers are making out like bandits.  There does not appear to by any reason for them to report accurately on pricing and volume.

Beyond the real estate market, even assessing the overall economic activity of the country is somewhat opaque for Beijing.  See this recent story from Xinhua, "China mulls unified GDP calculation":

China's top economic planning body has confirmed that China is considering bring local GDP under unified calculation in an effort to prevent local officials from cooking economic growth figures for political benefits.

...In the first half of 2009, the sum of provincial GDP figures was 1.4 trillion yuan more than the national figure, calculated by the NBS independently. Almost half of the provincial governments reported a double-digit GDP growth whereas the national growth figure was only 7.1 percent.

Leaving aside the cumulative difference in growth rate, that 1.4 trillion yuan imbalance amounts to an absolute yearly discrepancy of ~2.5% just for the first six months of 2009, which would severely complicate sorting out domestic economic policy.  It would also make strategic judgments by other countries rather problematic.
For what it is worth, my man on the ground is an architect who has been working in China for more than a decade now, building everything from government offices, to residential towers, to subdivisions, and beyond.  His latest big project under construction is a kilometer-long building containing housing, offices, performing arts spaces, sports fields along the "ridgeline" on top, and an interior train running the length of the entire structure.  It sounds like a fantasy land.  Perhaps it is.

In other news, the architect reports his firm just completely sold out a mid-range 40 story condo tower to individual purchasers in two days, as fast as the paperwork could get signed.  When asked if he thought this indicated a healthy market and real economy: "No way!"