This is the kind of thing that panics markets so let's hope it's nothing more than intelligent speculation.

New York Times:

As the Chinese economy continues to sputter, prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of the troubles.

Record-setting mountains of excess coal have accumulated at the country's biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said.

Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country's economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.

Indeed, officials in some cities and provinces are also overstating economic output, corporate revenue, corporate profits and tax receipts, the corporate executives and economists said. The officials do so by urging businesses to keep separate sets of books, showing improving business results and tax payments that do not exist.

The executives and economists roughly estimated that the effect of the inaccurate statistics was to falsely inflate a variety of economic indicators by 1 or 2 percentage points. That may be enough to make very bad economic news look merely bad. The executives and economists requested anonymity for fear of jeopardizing their relationship with the Chinese authorities, on whom they depend for data and business deals.

In China, nothing much has changed since Mao; they still kill the messenger if the news is bad enough so these provincial bureaucarts taint the data in order to keep their jobs.

The significance of a serious Chinese recession cannot be overstated. China, not the US, has been keeping the world economy afloat over the last two years. Their massive investments in commodities and infrastructure have propped up markets from the Middle East to South America. Cutting back on those investments as well as a general decline in business activity could tip the world economy into a recession.

With Europe in crisis and the US limping along, this would not be the time for that to happen.