Chinese statistics and Chinese milk packaging have something in common. Do not believe what you read on the label. Just as state-owned companies allowed suppliers to boost the supposed protein content of infant milk powder with melamine, an industrial plastic, so state-controlled statisticians have sometimes doctored official figures to suit the Communist party's needs.
The goal has been smooth growth. Thus state figures have sometimes underestimated true expansion. Likewise, in the previous slowdown, when electricity generation stalled, economic activity mysteriously rumbled on unaffected. Thus when we learn that China will, over two years, pump Rmb4,000bn ($586bn, €466bn) into an economy growing at "only" 9 per cent a year - a veritable comedown from the 10-12 per cent an octane-fuelled populace has come to expect - we should sniff the contents suspiciously.
Equity and commodity markets initially cavorted in response to signs that China, the world's only super-economy still going strong, was acting decisively to ensure things stayed that way. But, as the subsequent market sag hinted, the stimulus package may not be all that it seems. Real growth rates may already be lower than official figures purport. Stephen Roach, chairman of Morgan Stanley Asia, says Beijing is acting as though it is "panicked", suggesting that economic activity may have dipped below the 8 per cent Chinese observers, in their questionable wisdom, have determined as the level required to keep social unrest in check.
Certainly, anecdotal evidence suggests that output sank alarmingly last month, far more quickly than anyone imagined was possible just weeks ago. Here, a big chemicals company reports that orders fell by half in October. There, a banker that thousands of labour-intensive factories in Guangdong, the engine-room of China's export-led miracle, have disappeared almost overnight.
Export growth has slowed, but not yet stopped, suggesting there is worse to come. Without stimulus - if things go terribly wrong, perhaps even with it - economists are wondering whether growth could shrink to 6 per cent, at least for a quarter or two.
The sudden slowdown was not made in Wall Street. It originated in decisions adopted last year to take the heat out of a boiling property market - partly because of fears, now evaporated, about inflation. Banks were told to curtail lending to the property sector. Property developers were obliged to build lower-income housing and buying a second home was made more difficult.
China's policies contrasted with those in the US and Europe, where it was beyond the remit of independent central banks to try to tame asset prices. But bursting bubbles, even in a command economy, is not that easy. Instead of taking the froth off the property market, Beijing has drained it dry. "They thought they were fine tuning," says Arthur Kroeber, managing director of Dragonomics. "But China remains a boom-and-bust 19th century economy."
If attempts to ease growth lower have misfired, efforts to ratchet it up again may not go so well either. Ben Simpfendorfer at Royal Bank of Scotland says he is wowed by the sheer amount of money Beijing is chucking at the problem - at least 3 per cent of gross domestic product a year, even if one discounts half the announced investments as money already pledged. But China's "increasingly market driven economy" may sink more quickly than new funds can be deployed, he says.
Mr Simpfendorfer cites the housing market, worth about 7 per cent of GDP and now largely in private hands. Even if banks are instructed to lend, property developers cannot be obliged to borrow, putting the government at one stage removed from direct control over economic levers. Ten years ago, when most housing was public, turning the investment tap off and then on again was much easier.
Western governments, with newly acquired control over their once private financial systems, can hardly fail to sympathise with China's efforts to cajole banks into funnelling state money towards the real economy. Nor is Beijing alone in exaggerating the size and potential impact of stimulus efforts. Japan has turned double-counting into a comic art form. Yet, given the need to reassure shaken consumers, selling old money as new may not be bad policy.
China is a centrally planned system in a slow, uneven transition to a market economy. The US and Europe have, perforce, taken a step in the opposite direction. Neither can turn their economies on a dime.
Certainly, China's demographics, continuing mass urbanisation and the scope for improving productivity almost guarantee that fast growth will resume. But anyone who imagines that China possesses the immediate firepower to haul the world out of recession should run some lab tests. Like its dairy products, the China growth story is not quite as unadulterated as it seems.
david.pilling@ft.com
