(Ecns.cn) – A leak of classified economic data has been harming economic operations and disrupting financial market order in China, as well as damaging the government's credibility since last May. With a probe and crackdown being launched, the profit driven motives are slowly emerging.
On October 24, 2011, China's National Administration for the Protection of State Secrets and the Supreme People's Procuratorate announced jail sentences for two government officials who leaked economic data to securities brokerages.
Wu Chaoming, a former researcher with the Finance Institute at the People's Bank of China, was sentenced to six years in jail for intentionally revealing secret information to the securities industry 224 times, according to a statement by Li Zhongcheng, a state prosecutor.
Sun Zhen, a former secretary to a deputy director in the National Bureau of Statistics, was sentenced to five years behind bars for disclosing state secrets, said Li.
A message is thus being sent as a deterrent that China will take concrete measures to stop such wrongdoings and it may even strike harder in the future. Li also emphasized that further investigations are going smoothly, and the government is now trying to figure out the motives behind the leak.
Low costs but fat profits
Under the current circumstances where the market economy is developing rapidly, timely information is likely to determine the victory of a competition in the marketplace. Having smelled such opportunities, some officials have begun to think of devious ways to acquire a second income, especially those in high positions.
This year, whenever China's economic growth figures and other data including the inflation rate were released, the public would shockingly find that they matched the forecasts of certain securities companies and financial institutions with high accuracy.
Early in 2011, when China's first-quarter growth figure and other economic statistics were released by the government, nine of the numbers were in line with the forecast indicators reported by the Hong Kong-based Phoenix Television a day earlier.
This was definitely abnormal. Such information is market sensitive and has the potential to influence equity prices. It was even discovered that the data was circulating among investors days before the official announcement.
After investigation, the cases were found to have involved leaking of national macroeconomic data, and quite a few top officials had a finger in the pie, giving them large profits. Simply by sharing limited classified data without giving specific details, the officials were able to get a large amount of "lecture fees."
Securities brokers were the major information pursuers because they could estimate the trends, for example, in the stock market or bond market, and make the right decisions to either obtain larger profits or control risks.
Ticking time bomb
On April 14, 2011, when the Hong Kong-based media exposed the economic figures of the Chinese mainland prior to the official release, the global financial market was largely affected. Before the news was out, the U.S. Dollar Index had plummeted to a 16-month low. Then suddenly, the data leak let the Euro gain strength again the dollar, rising to 1.45 USD only because it exceeded the forecasts made by analysts in a positive way.
In June, the leak of China's second-quarter economic data spurred a big gain in the benchmark Chinese share index and set off a stock rally from Europe to the U.S., also because the statistics exceeded forecasts.
This is like a ticking time bomb. One can never know when it might explode and result in unfair operations in the market. The leaks allow traders to make profits at the expense of other investors by anticipating how stock and bond prices will react when the information is officially released.
More seriously, such leaks may affect government credibility, causing heavy losses to the interests of the country, society, and individuals.
Improving the system
Li Zhongcheng revealed that there were nine economic indicators whose monthly data had been leaked in the past cases, including the industrial added value, growth of fixed asset investment in cities and towns, gross domestic product, consumer price index, price index of industrial products, total retail sales of consumer goods, growth of RMB loans, broad money growth, and narrow money growth.
Li said most of these numbers were confidential state secrets and should not have been leaked. In July, China brought forward the release date for some key economic data, which was a measure to reduce the potential for leaks by cutting the time frame between finalizing the data and releasing it.
In the future, China will continue to strengthen efforts in cracking down such cases and giving wrongdoers severe punishment. Meanwhile, the government will enhance monitoring, management, as well as supervision mechanisms. Personnel should be aware that they cannot make deals at the cost of state interests, Li added.
