February 16, 2017 5:00 pm JST

World suspicious of dodgy data from China

Xiaomi deliberately swept inconvenient information under the carpet

YU NAKAMURA, Nikkei staff writer

Xiaomi smartphones used to be a really big hit with Chinese consumers.

GUANGZHOU -- To get a grasp of business conditions in China, it is especially important to pay close attention to exactly what official releases say. Do they tell the whole story or only a small part of the story?

The thing is, Chinese government and corporate numbers have a way of turning reality sideways.

Data disclosed by Chinese companies, in particular, are often manipulated to tell a good story.

It should be noted that the country's recent economic slowdown has caused a spike in the number of releases that apparently incorporate fabrications.

Not to say Xiaomi has been fibbing, but it has been in the spotlight since the start of this year. Since then, the company has said:

  • "We sold in excess of 1 million smartphones in October in India;"
  • "Our sales in the Indian market in 2016 surpassed $1 billion;"
  • "We filed a total of 16,000 patent applications in 2016 globally;"
  • "We will aim for 100 billion yuan ($14.5 billion) in sales in 2017."

These info-fragments make it difficult to evaluate Xiaomi's overall business performance. What is more noteworthy is that the company "fails to disclose more important information," according to a Chinese media outlet.

In fact, Xiaomi avoided releasing key data regarding its smartphone sales in China and around the world last year.

Why?

Chinese media assume Xiaomi's business performance is in decline.

U.S. researcher IDC in early February published survey results on China's smartphone market that says Xiaomi's 2016 sales in China plunged 36%.

The survey also says the company fell from being China's No. 1 smartphone maker in 2015 to No. 5 last year.

Judging by the survey, it seems Xiaomi's info-fragments are designed to show the company's good side and keep everything else out of the public's eye.

Another company in this harsh spotlight is LeEco.

The video streaming and broadcast service provider last summer said it would start producing electric vehicles in Zhejiang Province, China. In a highly publicized report, the company said it would make 400,000 of these cars a year after investing about $2.62 billion.

It added that another plant with an annual capacity of 200,000 electric cars would be constructed in the U.S., where mass production would begin in 2018.

Anyone who knows a decent amount of the automotive industry would have immediately started scratching their head or raising an eyebrow.

Going from zero to 600,000 cars in two years would require a lot of fund-raising, the hiring of workers with myriad skills and disciplines, setting up entire supply chains and creating a dealership network from scratch.

And it might be a good idea to do some quality checks.

Last fall, the company fell into a financial spiral; its share price soon followed.

In the U.S., clients have sued LeEco for unpaid bills.

The company has since downwardly revised its annual U.S. goal to 10,000 no-gas cars and pushed back production to 2019.

Finally, on Feb. 6, Shanghai-listed Shanghai Zhongyida was found to have falsified its sales figures for the past three months.

Now for local governments. Liaoning Province in January was discovered to have inflated economic statistics between 2011 and 2014. This suggests distortions have found their way into national statistics.

No wonder much of the rest of the world is casting a suspicious eye on Chinese data.

If the distrust persists, investors could lose confidence in the Chinese market, and the government would have even more difficulty than it does now in stemming capital outflows.

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