MANAGED NUMBERS

For a long time we hinted at what lots in the media seemed not to want to believe: that China's growth figures, to use a kind term, we're being managed.

Back in the double-figure-GDP growth days, there was probably less of it going on though even then one had that apocryphal feeling that comes from listening more to one's intuition than intellect, most likely a characteristic not much appreciated in our numbers-crunched madness today. (See Federal Reserve Bank).

Now, however, managing them seems much more necessary to damp down all kinds of unrest, political, social and otherwise. Another tip off in our view is the government announced shift from growth to domestic consumption. That China plays a hard game of beggar thy neighbor is undeniable to all but the entrenched.

Another perhaps kinder term, one frequently heard on the Street, is massaged. Either way, they're hardly to be trusted. And neither for that matter are those of any government. Part of  the difficulty is just the magnitude of the job. Another part is just plain old obfuscation. People in power usually like to stay in power. Some will try to twist that into an egregious violation of the PC code.

It isn't. Ask yourself this: Why would Wall Street, tobacco, big pharma, banks, to name but a few, be the only atolls of pollution in an otherwise ocean of purity? The answer is simple: that ocean of purity doesn't exist, private or public. In today's issue of Barron's, barrons.com/emergingmarketsdaily/2015/12/18/7-emerging-markets-to-watch-in-2016-bric-matters, they name seven emerging markets to watch in 2016. Here's what they write about China.

China: GDP figures are increasingly seen as “managed” by the government rather than an accurate reflection of the economy. Should growth slow faster than expected, expect more stimulus: we see room to cut local interest rates and/or increase government spending further. One possible stimulus we hope not to see is a sudden, material devaluation of the Chinese renminbi (five percent or greater as a one-off step). During the prior four years, while the renminbi (RMB) has weakened about 1.1% against the dollar, it has climbed about 20% against a broad basket of key trading partners … [The iShares China Large-Cap ETF (FXI) is down 13% this year.]

We're not basing our conclusions on one example, to be sure. As we noted above, it's been in the discussion for some time. Suggested in this evaluation by Barron's is a play, one way or anther.