The risks in playing China's numbers game

By David Stanway

BEIJING (Reuters) - Two years ago, an employee working for the China Iron and Steel Association was jailed for running his own business on the side, selling industry data collected by the assocation to foreign mining companies.

Acccording to Anbound, a Beijing-based economic consultancy, some of the information put up for sale by the CISA official included raw material inventories, the average cost of imported ores, gross profits per tonne of steel as well as production schedules at Chinese mills.

Much of that same information is now the subject of a new investigation that has netted Rio Tinto's (RIO.L) (RIO.AX) Shanghai-based iron ore team and is widening into the Chinese steel industry as a whole.

But secrecy in general is to blame, and China's failure to establish any legally compliant information agencies -- official or otherwise -- has created a system based primarily on leaks, said Anbound.

"The amount of information disclosed publicly is very small... but information from various statistics departments is being taken away by companies and sold off," it said.

On one side is a culture of silence among government officials, and on the other, a growing thirst for reliable statistics on the Chinese economy and its industries.

The situation has led to the establishment of dozens of semi-official agencies whose legal status remains unclear. Customs data, for example, is available through a number of competing private firms set up on the side by government officials.

"Government and enterprises should realise that by (providing) publicly available information, they can to a large extent satisfy the demand for commercial intelligence ... and reduce the space available for corruption and espionage," Anbound said.