When Apple cut its forecast for revenue on Jan. 2, world financial markets swooned. The tech giant’s own stock price fell 10 percent. The global reaction, however, was not caused merely by concerns about Apple.
To many investors, it was the reason given: flagging iPhone sales in what Apple said was a slowing economy in China, its largest customer base. Apple’s credibility about the Chinese market is greater than all the official statistics provided by the world’s second largest economy.
Financial experts are hungry for accurate data about China, from its unemployment rate to its overall growth. Corporate books in China are notoriously unreliable, says China expert Derek Scissors. During an economic downturn such as now, he adds, official data is “falsified outright.”
In Beijing, the central government confesses to the problem and claims it is punishing officials who issue bogus statistics. Yet the legacy of lies is difficult to lay to rest. The country’s recent statistical yearbook, for example, did not contain the usual table showing how many babies were born.
The authoritarian Communist Party has a hard time giving up a system of rewards for local cadre who can easily claim economic progress with manipulated figures. Apple’s recent data about consumer demand was a welcome bridge over this credibility gap.
The world economy relies on moral honesty about numbers, and not only in business. In Africa, for example, the credibility of the current vote counting in Congo may influence the global electronic market. That country, which held a dubious election on Dec. 30, accounts for two-thirds of the world’s supply of cobalt, a key component in smartphones and computer batteries. Investors want a reliable ballot count to ensure a legitimate leader and economic stability.
Europe’s economy is still lagging after Greece admitted in 2009 to have lied about the size of its fiscal debt and ability to pay off loans. When Volkswagen was outed in 2015 for lying about the emissions data of its diesel vehicles, it shook up the entire German car industry. And to achieve “climate targets” set by global agreements, nations must accurately report progress in reducing carbon pollution.
Accuracy is not the only concern. Transparency helps. After the 2008 financial crisis in the United States, the Federal Reserve began to be more open about its data analysis and offer “guidance” about the future of its monetary moves.
In China, a government not willing to be held accountable through elections views transparency more as a danger to its survival than a necessity for the economy. Honesty in data must often come from others. Apple’s warning about its future sales was a good signal for China to embrace honesty.