Saturday, February 27, 2010

Problems with Official Data on Chinese Overseas Investment

The Nigerian press just posted a story on Chinese investment in Nigeria. According to the report, Rong Yanson, China's Economic Counsellor, said that China's stock of investment in Nigeria is $7.24 billion, covering petroleum, iron and steel, manufacturing, agriculture, fisheries and pharmaceuticals. When I saw Rong Yanson in May 2009, he told me that Chinese investment in Nigeria was around $6 billion. Both of these figures are way beyond the statistics reported in China's Bulletin of Overseas Investment. In 2008, the Bulletin reported China's FDI stocks in Nigeria to be $795.91 million. So what's the real story?
I think Rong Yanson is right. FDI statistics coming out of China are notoriously bad. In Latin America, for example, the top two destinations for Chinese FDI are reported to be ... the Cayman Islands and the BVIs!  These two tax havens are obviously where Chinese companies operating overseas park their cash in order to keep it out of the strict exchange control system in China. And yet just the other day I was asked to review an academic paper that used China's official FDI data in cross-national regressions to say something about the driving forces for Chinese investment. Data this poor is not likely to prove anything beyond the truth of GIGO ("Garbage In, Garbage Out").

7 comments:

  1. In Barry Naughton's excellent book "The Chinese Economy" he devotes an entire subsection in the beginning to the unreliability of official statistics from Chinese government sources. Even Professor Hu Angang of Tsinghua University has pointed this out (although he used it in a context of some provincial governments most likely underestimating economic growth which would seem contrary to the usual criticism of them manipulating stats to overestimate it).

    Naughton does make a very good point though that despite the fact that these stats are very unreliable and quite often their is no alternative source of information, they can still be used, over a long term time scale, to discern long term trends and their direction.

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  2. Yes, Naughton (and you) make a good point about bad data and trend lines. I would say that we can discern long term trends & directions with some confidence by looking at China's official FDI data. But without some sense that the individual data across countries is off by the same general factor I would hesitate to use that data to say something about factors driving investment in particular countries, or groups of countries. For example, the MOFCOM data for South Africa shows the big $5 billion investment in Standard Bank, but the big oil investments in Nigeria do not show up. This will surely lead to misleading results.

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  3. Yes, I suppose the data set for individual countries would be riddled with outliers that are them selves unreliable. The other option would be to go from the stats provided, where possible, from African government sources. I suspect that they would by and large be more reliable.

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  4. China is very sensitive when it comes to sharing governmental information. Nigeria should be very careful, given that it already is in a volatile economic state.

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  5. Helen Black htblack@ymail.comDecember 26, 2011 at 11:30 AM

    Hello, I am writing a dissertation on China's FDI in Nigeria, have you any suggestions as to reliable data source I could use to illustrate the composition of FDI by sector? I cannot find anything on UNCTAD or IMF but may be looking in the wrong place. Any advice would be very much appreciated! Thanks, Helen

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  6. It's good to know that China supported Nigeria by sending some investments but I believe more countries should do the same thing.

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  7. I'm not in the perfect position to discuss these things, since China has been quite secretive in its foreign investments, but I somehow see this as a perfect opportunity for Nigeria.

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