Investor confidence shaky in China amid data hoarding

China's attractiveness to foreign investors faces a fresh challenge as concerns grow over the reliability and transparency of the country's economic data

China’s attractiveness to foreign investors faces a fresh challenge as concerns grow over the reliability and transparency of the country’s economic data. The recent decision by Chinese authorities to cease the publication of youth unemployment figures has sparked further worries, adding to a growing list of statistics quietly disappearing from the public eye.

Amid a turbulent property market, information regarding land acquisitions by developers has vanished from the public domain. Similarly, concerns about the debt levels of local governments persist, yet there is a lack of clear and accessible data on this issue. The list of missing or obscured statistics goes on.

A recent report by Business Insider suggests that the transparency of China’s economic data has historically mirrored its political landscape. With Chinese President Xi Jinping and the Communist Party embracing certain hardline practices, data availability seems to be dwindling accordingly.

This development has not gone unnoticed by investors. An educator based in China commented, “Such decisions negatively impact the sentiments of investors that naturally seek more transparency and disclosure.” As China’s economic situation faces challenges, authorities may be inclined to present a rosier picture than reality warrants, further eroding investor confidence. The ongoing trade tensions with the United States have also hindered data sharing between China and the international community.

Data authenticity has long been a contentious issue, but when China’s economy was thriving, global investors showed a willingness to overlook some of these concerns. Now, as economic indicators falter, Beijing’s credibility in handling data discrepancies is being called into question.

The Business Insider report highlights that key economic data, from exports to cement production, which are vital for understanding China’s structural challenges, have either disappeared or become so unreliable as to be useless. These developments underscore a deeper structural slowdown in China’s economy that can no longer be ignored.

Foreign direct investment (FDI) into China has been on a downward trajectory since the onset of the Covid-19 pandemic, with the April-June quarter reaching a record low. In 2022, China attracted $180.17 billion in FDI, marking a significant 47.64 percent decline compared to the previous year. The trend continues in 2023.

Doubts about China’s commitment to openness have further deterred investment. A survey by the Japan External Trade Organisation (JETRO) found that over 72 percent of Japanese companies were eager to expand their operations in India, while only 33.4 percent expressed similar interest in China. Additionally, a survey by AmCham China revealed that confidence in China’s commitment to openness has waned, with only 34 percent of respondents believing the country would continue to open up over the next three years, down from 61 percent two years ago.

As China grapples with economic challenges, its ability to maintain transparency and credibility in economic reporting becomes increasingly pivotal for regaining investor trust and attracting foreign capital.