Dept. of Atrocious China Journalism, Evans-Pritchard Edition

In today’s Daily Telegraph, (h/t danwei), Ambrose Evans-Pritchard notes that China’s State Reserve Board has been importing large volumes of copper “beyond the usual rebuilding of stock for commercial purposes” and speculates – without resorting to a single Chinese source – that China must be replacing its dollar reserves with metals (possibly with the long-term goal of creating a ‘copper standard’  to replace the dollar as a global currency). Evans-Pritchard doesn’t cite a Chinese copper trader to support this hypothesis; nor does he cite a member of the State Reserve Board. Instead, he cites foreigners who know little more than he does:

While it makes sense for China to take advantage of last year’s commodity crash to restock cheaply, there is clearly more behind the move. “They are definitely buying metals to diversify out of US Treasuries and dollar holdings,” said Jim Lennon, head of commodities at Macquarie Bank.

Except that they’re not. The metals stockpiling program – publicly announced and explained in December – was and is designed specifically to prop up China’s ailing, employment-intensive metals industries. In late January, Caijing published an extensive (English language) article explaining that the central government was not directly buying the reserves, but was instead licensing and subsidizing the purchase of stockpiles by private and state-owned metal companies:

Caijing learned that, under the reserve scheme, a company must first sign a reserve contract with the government to hold metals under government guidance. Afterward, enterprises can apply for equivalent bank loans, using a reserve as collateral.

Got that? The purpose of the stockpiles is to provide collateral for guaranteed loans to support China’s ailing metal industries. If a stockpiling company defaults, then China is left with a big pile of metal that may or may not be worth as much as it was at the time of purchase. Now, whatever else this program may be, it most certainly is not a program to replace dollar reserves with copper, much less a long-term plot to rejigger the global financial system. If Evans-Pritchard (or his assistants) and his sources had bothered to do even a cursory google search on Chinese metal stockpiling they might’ve figured this out (perhaps, even, they might’ve come across this January 30 post on the subject from a small-time blog based in Shanghai). Alas, they didn’t, and thus they leave us with yet another sorry, overheated example of what happens when foreign journalists write about China without bothering to inquire of Chinese sources. Way to go.

[Update: Just noticed that this post is #500 in the illustrious history of this (almost) two-year-old blog.]

[4-17 Update: Sigh. As sorry proof of the damage that bad (China) journalism can do, I point readers to the usually excellent China Car Times blog, and its April 16 post, China Storing Up On Copper for Hybrid Revolution.” Not to single out China Car Times – there are other blogs, with equally overheated reactions to Evans-Pritchard’s column.]

7 thoughts on “Dept. of Atrocious China Journalism, Evans-Pritchard Edition

  1. Congratulations on your 500th post. This blog is rapidly becoming one of the authoritative sources on (1) scrap metal in China (2) Catholicism in China.

    Frankly, 90% of “business” journalists have no idea what they’re talking about. Heck, most stock-market related articles show no evidence that the reporter understands what a stock price represents — to them, it’s just this magic number that goes up and down.

  2. Adam, you are a scrappy ankle-biting terrier always good for a tear at the vermin.

    (That was intended as a compliment.)

  3. A propos … nothing in the above post, but if you haven’t already seen the news you might be interested. We’ve got a new bishop here in Hong Kong. Very exciting. Well, actually not exciting, but in general it’s better for episcopal transfers not to be.

    Cardinal Zen is to be in some sort of “China-watching” role, which will doubtless infuriate a few people in the Religious Affairs Bureau.

  4. Checking sources?! What journalistic fantasy land are you living in!? Journalists haven’t routinely checked sources since the early ’90s.

    Which is why I (among others) call them “churnalists” and the “stories” they publish “churnalism”.

    Somewhere out there is a press release, and on that press release is the oh-too-convenient quote by Mr Lennon. Search on the quote in Google to see the legs this thing has. Here’s the quote: “They are definitely buying metals to diversify out of US Treasuries and dollar holdings”.

    Not that you _shouldn’t_ embarrass churnalists as much as possible when they are caught reprinting press releases, but the sense of outrage is _way_ over the top. This is business as usual. “Gil” above is right but wrong: there are no serious reporters.

  5. Evans-Pritchard @ Telegraph has been known to be alarmist before. This should not be too much of a surprise.

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