China Increasingly Obscures True State of Its Economy to Outsiders
New data restrictions have made it harder to get details on what's happening inside the country
China's Communist Party has long maintained tight control over information, and the effort has intensified under leader Xi Jinping. The country has become increasingly opaque over the past year, even as its presence on the world stage grows.
A new data-security law has made it harder for foreign companies and investors to get information, including about supplies and financial statements.
Several providers of ship locations in Chinese waters stopped sharing information outside the country, making it hard to understand port activity there.
Chinese authorities have restricted information on coal use, purged documents related to political dissent cases from an official judicial database, and shut down academic exchanges with other countries.
"China has always been a big black box," said Stephen Nagy, a politics and international studies professor at the International Christian University in Tokyo.
"The diminishing access to information is making it even harder for foreigners to understand what's happening in the country,'' he said, "and that black box becomes even blacker."
Companies and governments are left trying to figure out how to engage with a country whose economy is approaching America's in size.
China's increasing secrecy isn't the result of any single policy, businesspeople and political analysts say, but rather a combination of factors: a response to the pandemic, growing concerns about data security and a political environment in which the outside world is viewed with suspicion.
The U.S. has also taken moves to partially decouple the world's two largest economies, including limiting Chinese access to American technology and research universities through trade and visa restrictions.
Faced with increasing antagonism from the U.S. and other democratic governments, Mr. Xi has reversed course from his predecessors' emphasis on humility and openness to focus on national pride and self-sufficiency.
Once a frequent traveler, Mr. Xi hasn't left the country since he publicly acknowledged the severity of the Covid-19 outbreak in January 2020.
Strict Covid-related border controls, including canceled flights and weekslong quarantines, have added a drastic drop in face-to-face interactions between Chinese citizens and the world, compounding the disconnect.
Airlines carried around one million people in and out of China over the first eight months of 2021, down from almost 50 million over the same period in 2019, according to data from the Civil Aviation Administration of China.
Some Chinese looking to travel abroad say they have been denied passport renewals or been pulled aside at the airport by border officials who tried to dissuade them from going, citing government directives to minimize travel.
China's National Immigration Administration didn't respond to a request for comment.
One driving force behind the expanding secrecy is a new data-security law that went into effect on Sept. 1, after Chinese officials grew concerned about the transfer of potentially sensitive data overseas. It subjects almost all data-related activities to government oversight, including their collection, storage, use and transmission.
Since the law was passed, companies in mainland China have grown more reluctant to share information with multinationals in strategic sectors like finance, health care, public transportation and infrastructure, according to Jonathan Crompton, a Hong Kong-based lawyer at the law firm Reynolds Porter Chamberlain LLP.
Authorities are ambiguous about what constitutes sensitive information, adding uncertainty for Chinese companies over what they can share with foreign partners.
Suppliers of metals like cobalt and lithium used in electronics have grown reluctant to share information with customers outside China, said one executive at a major U.S. technology company.
Data the suppliers now consider sensitive includes details like how much of a given metal they have available or what percentage of their supplies are recycled, the person said, making it difficult to plan production and ensure compliance with environmental rules.
Zero2ipo Holdings Inc., which operates one of China's most widely followed databases of investment financing, PE Data, has stopped selling its data to customers based overseas.
A spokeswoman said that the company's financing data is only meant for China-based users and for internal use, and that any changes were related to the data-security law and other corporate considerations.
Steve Dickinson, a lawyer at U.S. law firm Harris Bricken, recalled a recent episode in which a U.S. client had asked a Chinese company for audited financial statements to determine whether it was creditworthy.
"The latter declined, citing Chinese policy that states they can't release financial statements to foreigners,'' he said. "The client had to move forward with the partnership without the information.''
"The lack of data increases the risk of scams and fraud for companies looking to do business with China.''
Mr. Dickinson added he also had trouble accessing China's trademark and corporate databases and other Chinese websites from his office in Seattle, resulting in the firm hiring a team in China to do Chinese due diligence and intellectual property work.
In early November, global ship-tracking platforms began to notice disruptions to the flow of location data of vessels in Chinese waters.
Some local providers had stopped sharing detailed information of ship positions, citing the new data-security law. A Chinese state media report on Nov. 1 described a nationwide crackdown on local providers of such data, citing national security implications.
While satellite imagery is still available, removing access to more detailed, real-time vessel movements around China makes it difficult for companies to accurately track their shipments to and from the world's largest exporting nation, said Nikos Psaltopoulos, chief operations officer at Athens-based global maritime analytics company MarineTraffic.
It also hinders the ability of financial institutions to gather information on port activity to make accurate macroeconomic predictions on growth and trade, he said.
Samir Madani, co-founder of oil tanker data site TankerTrackers.com, said that without such precise vessel location data from Chinese providers, it is much more challenging to figure out the volume of China's oil trade with North Korea, Venezuela and Iran, countries that are subject to United Nations or U.S. sanctions.
Last year, with prices of coal creeping higher in China, privately run commodity-pricing providers stopped publishing daily prices and data about Chinese stockpiles.
Fenwei Digital Information Technology, which runs SXcoal.com, with data about China's coal industry, issued a notice that it would stop sharing some pricing data last December to "avoid misjudgment of price trend by market participants."
Fenwei didn't respond to requests for comment.
Other closely watched gauges of coal demand, such as stockpiles at Chinese utilities, had gone dark beginning summer 2020. The dearth of data became especially problematic this fall when surging coal prices, in part due to a shortage of domestic supplies, sparked an energy crisis.
One longtime coal analyst in Singapore said that the extent of the power crisis took traders and analysts by surprise because of the lack of timely information about coal demand and use.
One of the most dramatic reversals in Beijing's openness has been in academia -- once seen as a beacon of engagement between China and the West. China has steadily closed off Western scholars' access to research archives and made it more difficult for Chinese universities to host international conferences.
In August, China's Ministry of Education published data showing it had terminated 286 cooperative programs between Chinese and foreign universities in 2018 and 2019, saying some of the programs didn't meet the teaching and instructional standards of the ministry.
Schools in the U.K., Russia and the U.S. had the most number of programs cut, and computer science, biotechnology, international economy and trade were the courses most affected, according to an archived version of an official website from September.
More recently, universities have imposed tighter approval processes for scholars in fields such as international relations and Chinese historical research hoping to travel overseas or participate in Zoom calls with foreign scholars.
"In general, we're not meeting and we're not talking," said International Christian University's Mr. Nagy. "We're not having dinner, and we're not walking outside. And that's where you share your ideas and share insights."
The education ministry, in a faxed response to queries, denied that China was tightening controls or hindering cross-border academic engagements.
"The Covid-19 pandemic has objectively created obvious obstacles to personnel and academic exchanges between educational institutions in various countries," the ministry said, adding that China will continue opening up to the world.
Jia Qingguo, former dean of the School of International Studies at Beijing's Peking University, noted the stricter academic controls in a plea he submitted at China's annual legislative meetings in March.
He added that some government departments had taken measures to tighten management over "various considerations," without specifying what they were.
"Excessive management has cut us off from studying advanced ideas, research methods and political experiences from abroad," Mr. Jia wrote, adding that some universities allow scholars to interact with foreigners only if at least one other colleague is present.
He didn't respond to a request for comment.
Foreign businesses and investors have begun to search for alternatives for gaining visibility into China.
Matthew Grey, the co-chief executive officer of TransitionZero, a London-based climate-focused nonprofit, said his group received more than 70 requests for China data from investors and traders, with the most demand coming after it published a report in April that used satellite imagery to estimate the usage of coal-fired power plants in China.
The opacity is likely to increase tensions between China and the U.S. in both the short and long term, according to political analysts and U.S. officials.