As if there were any doubts that China’s economic stats were a tad “Shady”, let those worries rest. China is reportedly issuing verbal warnings to economist, analysts and business journalists that are making less than rosy predictions for the future of the country’s economy.

Officials from securities regulators, media censors and other authorities have taken to warning those who make public remarks that do not fit with the government’s official line. Sources claim that outspoken economist Lin Caiyi is one person that has received a warning in the past few weeks, writes Lingling Wei for The Wall Street Journal.

China "Encourages" Economists To Be More "Positive" About The Economy

China issues warnings to critics of economy

Lin is chief economist at Guotai Junan Securities Co and has spoken out on rising corporate debt, oversupply of housing and the weakening of the Chinese yuan. She had previously received a warning from the securities regulator before the latest one,which came from the Guotai compliance department.

Guotai is owned by the Chinese state. The compliance department apparently warned against “overly bearish” remarks.

Other stories of a clampdown come from analysts at brokerage firms and think tanks. For the moment the evidence is purely based on these accounts, but it seems fairly widespread.

Until recent economic struggles information about the economy was largely unaffected by state censorship. However volatility in the stock market and badly received exchange-rate policies have made investors question the competence of the government in managing the economy. In recent months the ruling Communist Party has been making optimistic noises in a bid to reassure markets.

However by exercising this control over information the government could knock investor confidence even further.

Transparency key to maintaining confidence

“Vigorous debate among economists and public confidence in this conversation is critical if China is to successfully navigate the choppy economic waters,” said Scott Kennedy, a deputy director at the Center for Strategic and International Studies, a Washington think tank. “If the party and government only want to hear good news, then they’d be better off hearing nothing because the value of the words would be less than zero.”

Foreign publications are also now subject to stricter controls than before. Reports have also surfaced of a siege mentality among top officials who seem determined to head off foreign speculation on China.

Chinese President Xi Jinping visited state media earlier this year to underline the need to toe the party line. This pressure means there are fewer stories on critical topics and more positive stories on the economy. Journalists have been told to make sure their stories largely focus on official information provided by the China Securities Regulatory Commission.

“As a Chinese reporter, you can do anything but journalism these days,” said a senior editor at a state-owned media outlet.

Controls could lead to lack of information for policymakers

Perhaps more worrying is the control of policy research and market analysis, which could prevent officials from having access to real data. As for Lin, the economist at Guotai Junan, she said that she first received guidance on her remarks last fall.

“I was told by regulators not to recommend shorting the renminbi,” Ms. Lin told the gathering, “so I’m just going to recommend buying the dollar.”

The propaganda department of the financial hub Shanghai recently told a think tank that it should halt its research into a planned debt-for-equity swap program. The program was supposed to help state companies reduce their debt, according to insiders.

Research must stop in case it shows unfavorable conclusions. Premier Li Kegiang and other top officials have already approved the program, while many analysts have spoken out in opposition.

The critics say that by allowing banks to exchange bad loans for equity in companies they lend to, the program could encourage companies to stay afloat when they should sink. This would leave banks pressed for capital as well.

Political climate influencing work of economists

Some economists have apparently been made to back down from their views given the political climate. Gao Shanwen, a well-known economist, told investors about his grim predictions for the future of the economy in April.

Gao, who is chief economist at brokerage Essence Securities Co., said that “a lot of the official data aren’t reliable” and the economy has some “big problems.” He was speaking at a closed-door event in Hong Kong.

These remarks spread like wildfire across social media, and apparently caught the attention of authorities. Gao later issued a statement on popular Chinese messaging app WeChat, clarifying that his previous remarks were “made up.”

Shortly after he published an economic report that contained no criticism.

If Chinese authorities are attempting to restrict the flow of information on the economy, it could end up blowing up in their faces. Investor confidence is built on transparency, but China risks eroding it by only publishing good news stories. But for the time being, those who should be most worried are the dissenters lest they disappear one day