A Year in China's Economic Data
Chinese holidays (some of them fixed, some of them floating), political set pieces, and changes in the season affect what is happening to the data. Keeping an eye on the calendar makes understanding what is going on easier.
January and February: New Year's Holiday Plays Havoc with Data
Chinese New Year is the main event in the annual calendar, the equivalent of Thanksgiving, Christmas, and New Year's Day in the United States rolled into one, but stretched over an entire week. Airports and railway stations are packed with workers returning home for the most important holiday of the year. Work on construction sites grinds to a halt, factories cease production, and the financial markets are closed. With the New Year falling in January some years and February in others, the calendar plays havoc with the economic data. The NBS attempts to overcome the problem by publishing some of the main data points for January and February together. Data that is published for separate months, including data on trade from the Customs Bureau, needs to be treated with caution because of the seasonal distortion.
The holiday also impacts the financial markets. With households hungry for cash to pay for train tickets and to stuff into red envelopes as gifts for family members, and firms demanding extra funds to pay a New Year's bonus, the banks run short. Short-term interest rates kick up, and the PBOC injects liquidity to make up the shortfall. Throw the chance of very bad weather impacting economic activity into the mix, and data for the first two months of the year needs to be treated with caution.
March and April: Twin Work Meetings Set the Direction of Economic Policy
With the New Year's festivities over, March's main event is the government's twin work meetings. In theory, the National People's Congress (NPC) is China's highest authority. In practice, key decisions are shaped by a smaller group at the October meeting of the Communist Party's Central Committee. That does not mean the NPC is without interest. The premier's work report sets out the government's overall economic policy stance and the priorities for the year, including a target for GDP, CPI, and money supply. The National Development and Reform Commissions (NDRC) expand on that with targets for trade, fixed asset investment, and retail sales. The budget sets priorities for government spending and the target for the fiscal surplus or deficit. The Chinese People's Political Consultative Conference is second fiddle to the NPC, but it takes place in parallel and provides the financial press with a rare opportunity to doorstop decision makers and ask them difficult questions.
In April, following the confusion caused by Chinese New Year, GDP data for the first quarter brings some welcome clarity on the state of the economy. Publication of the GDP data is typically preceded by a meeting of the State Council, chaired by the premier and with all the main economic policy actors in the room. The State Council reviews the economic data ahead of its publication, agrees on the direction of economic policy for the quarter ahead, and sometimes makes decisions on the use of key policy instruments such as the interest rate. In April 2010, the State Council meeting resulted in the announcement of a crackdown on bubble prices in the real estate sector.
May and June: No Rest for the Workers
Until 2007, workers enjoyed a week-long holiday in May. From 2008, that was reduced to a single day, on May 1. The change from a week-long to a single-day holiday affects the seasonal pattern in the historical data, and the 1-day holiday continues to reduce working days in May relative to April and June, which can have an impact on the month-on-month data.
July and August: Political Slumber and Natural Disaster
Beijing summers are hot. The temperature pushes up into the high 80 degrees Fahrenheit. In the Deng Xiaoping and Jiang Zemin era, China's leaders sloped off to Beidaihe, a nearby coastal resort, for a few weeks of swimming and political intrigue. Hu Jintao decided that an annual holiday for the entire leadership did not fit with the image of simple living he wanted to project, so the Beidaihe retreats fell out of favor. But being in Beijing does not appear any more conducive to making difficult decisions. The publication of GDP data for the second quarter in early July is preceded by the normal meeting of the State Council. But in general, the summer months are not heavily populated with major political or economic events.
Natural disasters are not confined to the summer months. Snowstorms in the winter and earthquakes anytime they please have claimed lives and treasure in recent years. But the summer months are particularly prone to natural calamities. Floods can damage infrastructure and put a dent in output for the industrial and agricultural sectors. July 1 also marks the date of the founding of the Chinese Communist Party in 1921, a sensitive anniversary.
September and October: National Day Holiday, Central Committee Meeting
The moon festival in September or october and National Day at the beginning of October introduce further confusion into the economic data. The fall holidays are not as important as the New Year's festivities. There's no exodus of migrant workers from the factory back to the farm, construction continues, and shops stay open. But the two holidays put a significant dent in working days, especially for white-collar workers, and affect the economic data for September and October. The National Day Holiday on October 1 is also the anniversary of the founding of the People's Republic of China in 1949.
In mid-October, a meeting of the Central Committee of the Communist Party brings together China's most senior decision makers. The meeting has assumed a new importance under the leadership of Hu Jintao as a forum in which important economic decisions are made. The October 2010 meeting came ahead of a decision to raise interest rates and anticipated a shift in economic policy out of crisis response and into neutral mode. The Central Committee meeting also sets the tone for the meeting of the NPC in March the next year.
November and December: Central Economic Work Meeting
In the first half of December, the main event is the Central Economic Work Meeting. With the president and premier in attendance, the meeting brings together senior leaders from central departments and provincial governments for 3 days of discussions. The meeting sets the tone for economic policy in the year ahead, identifying the overarching stance for monetary and fiscal policy, and setting out priorities for structural reform.