The gains reported by the Communist Party of China (CCP) for August in various industrial sectors, in some of which they exceed 55 percent year-on-year, generated serious doubts given the world context and certain inconsistencies in the figures.   

The entity in charge of the statistics for the CCP, the National Bureau of Statistics (NBS), attributes the profits to the continued recovery of production and demand and the fall in costs and fees of companies, according to ZeroHedge on Sept. 27. 

The NBS pointed to the 19.1 percent increase in total profits of industrial companies over a year ago, which is not consistent with the 4.9 percent increase in industrial income, which is what largely causes the increase in profits. 

“How China is managing such dramatic profit margin expansion without mass layoffs, and in a time when supply chain transformations should be crushing margins remains a great unknown.,” noted the ZeroHedge reporter Tyler Durden.

Additionally, manufacturing output price indices are largely separated from reported profits. After following a relatively stable performance over the past three years, they began to inexplicably shoot up in April amid the trade crisis generated by the pandemic. 

It is also worth mentioning that the NBS data is very flattering for leader Xi Jinping, who is interested in showing better results than those obtained by President Donald Trump.

“In an authoritarian system there is definitely an incentive for statistics officials to publish data that pleases the government,” noted Hong Kong University of Science and Technology economics professor Carsten Holz.

“However, at the same time, economic policy that is based on unreliable data can only be poor and therefore leads to results that will not please the government,” Holz added, noting that regional data does not match that reported by the CCP. 

A concrete reference point could be given by the fact that the trading of the bonds of the Chinese company Evergrande, the most indebted real estate developer in the world, was stopped. Its debt exceeds $120,000 million.

This occurred after reports of its efforts to avoid a cash crisis drove its stock price down by nearly 20%.

“Evergrande is a significant source of systemic risk,” said Nigel Stevenson, an analyst with GMT Research, according to the Financial Times on Sept. 25.  “There is huge debt in the publicly traded parent company that will ultimately have to be refinanced,” he added.

The biggest state banks of the CCP registered historic falls in profits due to bad debts, according to an Aug. 30 Bloomberg report. 

Zeng Gang, deputy director of China’s National Institute of Finance and Development, told Bloomberg that the decline in the banking sector’s profitability will continue for at least the next two quarters.