1 recession and news
Chinese and U.S. Media Coverage of the Global Recession (2008-2009)
– Linking Economic News and Public Expectation
by
H. Denis Wu, Ph.D.
Address:
College of Communication
Boston University
640 Commonwealth Avenue
Boston, MA 02215
USA
Voice: +1.617-358-1305
Email: hdw@bu.edu
Dr. Wu is an associate professor in the College of Communication, Boston University. He
received his Ph.D. from the University of North Carolina at Chapel Hill. His research areas are in
international communication and political communication. The author thanks the assistance of
Dino Christenson and Tianhao Yang.
Running head: recession and news
A research paper presented to WAPOR 64th annual conference in Amsterdam, the Netherlands,
on September 22, 2011.
2 recession and news
Chinese and U.S. Media Coverage of the Global Recession (2008-2009)
– Linking Economic News and Public Expectation
Abstract
This study examines economic coverage of Chinese and U.S. media during the two-year
recession period, along with data of leading economic indicator and the public’s expectation
toward the economy. U.S. news coverage is found more likely to be domestically focused and
negative. China’s economic coverage affects the Chinese economic expectation, but the U.S.
coverage does not. Additionally, the U.S. Leading Economic Indicator (LEI) responds to frontpage coverage, supporting the “media malady” hypothesis. The front-page news also responds to
just about everything in the model in the U.S. and just about nothing in China. Valence of
economic stories appears to be powerful in the U.S. but not in China.
Key words: recession, economic news, China, economic expectation
Introduction
The last global recession that started in late 2007 is the most severe economic downturn
in the U.S. since the Great Depression (Krugman, 2009). Given the interconnected economies
and increasing globalization around the world, the U.S.-originated recession soon spread to other
parts of the world, creating a global economic stagnation that still has not seen the end of the
tunnel in as late as 2011. Almost all the Western economies suffer greatly from the last wave of
recession. Despite some signs of relief in early 2011, the threat of another wave of recession to
hit the U.S. seems real, which is coupled with the credit meltdowns in some European nations
and drastically dissonant opinions toward the solutions of the global economic upheavals. All of
these issues are enormously related to communication among the governments involved, the
general public, and the media for identifying the key issues and finding consensus to solve the
problems. Therefore, mediated communication for sensible solutions about the ailing global
economy should be considered as one indispensable aspect by decision makers.
3 recession and news
News coverage about the volatile economic situation can be a major source of
information for nervous consumers and investors. Although informative, incessant bad news can
trigger deterioration of public sentiment toward the economy, even creating mass panic, which
can be covered extensively and make things even worse later. It is perhaps unproductive to see
the front page of the Wall Street Journal (August 13, 2011) that prominently displayed the
psychological ups-and-downs of the investors about the extreme fluctuation of the stock market
with the tag line, “a week that toyed with investors’ emotions.”
While the West has been struggling with economic stagnation, China, the rising
economic powerhouse and the factory of the world, seems to have experienced different
problems of their own. For one thing, its economic growth rate during the Great Recession
period has hovered around 9-10% -- which, compared to other Western economies, is stunningly
high. With eased access to finance and rapid economic expansion across the nation, China was
actually observing inflation and overheated economy and concurrently mulled over the risk of
having recession that may eventually come ashore. Thus, to Chinese, it is an issue of recession
threat rather than of reality. The U.S. and China not only differ in their economic conditions
during the time frame, their press systems are significantly different. The Chinese’s press system
is controlled by the government and/or the Chinese Communist Party, producing and circulating
information that does not go against the interests of the ruling entity. On the other hand, the
American press system is considered free and highly commercial. It is therefore interesting, and
theoretically meaningful, to investigate how media of these two countries cover the dicey
economic situations and whether the trend of economic coverage reflects, in one way or another,
the state of the economy and/or public sentiment toward the economy. It is also fruitful to see
4 recession and news
whether media can shape people’s views about the state of the economy and, subsequently,
influence the economic performance.
Literature Review
News media is supposed to provide accurate, objective information for its audiences. But
when it comes to the economy, the task becomes almost impossible. The subject itself has
recently been questioned for its scientific nature. New York Times veteran business and
economics reporter Louis Uchitelle said that journalists tend to report on economics “as if it were
a science” (Barber, 2000, p. 369). The recently emerged debate about the superiority contest
between the Chicago School and Keynesian economics in dealing with recession seems a case in
point. If economics were not science, then its coverage could be even shakier. Apart from the
complexity of economics, whether business or economic journalists can systematically and
timely reflect the economic situations constantly is doubtful. As Walter Lippmann (1997) keenly
observed, reporters have no means or capacity to truthfully mirror everything that takes place on
earth; their roving eyes usually are caught with novelty, deviance, or “an aspect that has obtruded
itself” (p. 216). With that in mind, one cannot argue that economic news can monitor and reflect
all economic facets at all times. Therefore, how the media report on the economy front during
crises is tremendously important. It can link to the public’s knowledge, sentiment, and decision
making.
Whether media generate impact on the public perception about the economy has been the
focus of communication scholars in the past recessions (e.g., Blood & Phillips, 1995; Wu,
McCracken, & Saito, 2004). Even though economists may have different views about the forces
that drive the economy, there seems to be a consensus about the impact of the sentiment – from
5 recession and news
consumers, executives, or investors – on the economic trajectory (Katona, 1959, 1964).
Historically speaking, low confidence is associated with long-term economic downturn, such as
the cases of the Great Depression in the U.S. in the 1930s and the Lost Decade of Japan during
1988-1999.
The influence of the public sentiment on the economic performance has called for
attention on the media by the Wall Street as well as the political arena. Business leaders as well
as politicians at all levels endeavor to put the most positive messages in the media to boost
confidence, hoping to prevent or reverse the downturn spiral. On the other hand, media scholars
have long noted the negativity tendency of the news (see Galician & Vestre, 1987 for summary)
and are concerned with whether the extensive coverage about recession may have hindered the
recovery process, creating a “media malady” scenario. Political scientists have already concluded
that negative news draw more attention and generate more impact on the electorate than the
positive counterpart (Geer, 2006). With regard to economics, Goidel and Langley (1995) and Ju
(2008) have demonstrated that American and Korean media tend to cover negative economic
news more than positive counterparts. China’s media system is substantially different from the
above two countries in that its media practitioners do not enjoy the same level of freedom (see
Karlekar, 2010 for Freedom House press freedom report) and its operation and ownership are
tightly managed by various levels of government and party (Hachten & Scotton, 2006; Merrill,
1995). Not only would so called sensitive information be likely to be gagged, the Internet is also
closely monitored and censored. It would be interesting to see if this tendency of covering more
negative news holds true for the Chinese media. This present study is probably the first endeavor
to systematically examine the economic coverage of Chinese media.
6 recession and news
Also worth investigating is whether the valence and the quantity of economic news play
any role in shaping public opinion about the economy in this recession period, particularly
between Americans and the Chinese. The existing literature seems to only include recession
news (i.e. negative news) in their models and fails to take the entire spectrum of economic news
into consideration. It is also common to only analyze one country’s data; rarely has any
comparison of media reception been implemented between these two major economies
concurrently.
This line of inquiry is based on the traditional effects theory to gauge media effects under
varied media systems. There are only a handful of empirical studies that directly address this
issue of media influence on economic evaluations and these studies have concluded with
different magnitudes of news influence on people’s appraisal of the economy. For example,
Blood and Phillips (1995) examined the impact of recession headline news during the recession
in the early 1990s with time-series analysis and found significant support for news effect. Haller
and Norpoth (1997) took a slightly different approach – with a longer time frame – to study
economic news impact on public evaluation and found that news only played a modest role.
They also found that news did not improve people’s capability in assessing the economic
situation. Wu and his colleagues (2004) studied the Japanese recession during the 1990s and also
did not conclude similarly with Blood and Phillips. Different duration of recession was attributed
to the difference of findings. And this present study, with two countries’ data, would provide a
needed update for the scholarship of economic communication.
Based on the above literature reviewed, the following research questions were formed to
guide the examinations.
7 recession and news
RQ1: How did the media cover the state of the economy during the recession period? Did the
media closely follow the Leading Economic Indicator (LEI)?
RQ2: How did the media coverage differ between China and the U.S.?
RQ3: Did the media coverage affect people’s expectation about the economy in China and the
U.S.?
RQ4: Did the media coverage lead to Leading Economic Indicator (LEI)? That is, is the
hypothesis of “media malady” supported?
RQ5: Did the people’s expectation about the economy lead to the Leading Economic Indicator?
Data
Economic news from mainstream newspapers from China and the U.S. were gathered and
content analyzed. The sample from China includes the People’s Daily, Southern Metropolis
Daily, and China Business News. The People’s Daily is the Chinese Communist Party’s organ,
which, despite with uncertain circulation number, remains an important medium for obtaining
party policies and official announcements. Because there are no truly nationally circulated
newspapers in China, two regional major papers were selected. The Southern Metropolis Daily,
based in Guangzhou (a major city near Hong Kong and capitol of Guandong province), is known
for its investigative journalism and provocative commentary and boasts the largest circulation in
the province. The other regional paper selected for this study is the Shanghai based newspaper,
China Business News. Its coverage focuses on business and economic activities and can reach
readers in the most influential business circle of China.
The U.S. counterparts of this study are the New York Times and Wall Street Journal. The
Times is an elite press of the country and is probably the most influential newspaper that not only
8 recession and news
impacts the general public but also influences other news media’s agendas. The Wall Street
Journal, also based in New York, is the primary U.S. paper for business, finance, and all other
economic activities. It is a must-read paper for any American involved in business in the U.S.
and overseas.
All the news stories on the front pages during the two years that dealt with any aspect of
the economy were selected and coded. A graduate student identified and coded all of the stories
in the selected media. The coding items include date of publication, focus of the story, word
count, topic, valence, and source. The intercoder reliability test was conducted between the
primary coder and another graduate student. The test results of all coding items – with Holsti’s
formula – are over 80%, indicating the overall reliability of the coding.
Other economic indicators used in this study were obtained from two separate sources.
The Leading Economic Indicators (LEI) of the U.S. and China were purchased from the
Conference Board, a non-for-profit, non-advocacy organization based in New York. The LEI is
widely used in the business circle for its indicator of the nation’s overall economy state. It is a
monthly index with year 2004 as the basis (100) for estimate of economic performance in other
years. It is composed of six factors, of which the primary factor is 5000 industry enterprise
diffusion index (raw materials supply index). Also obtained from the Conference Board is the
“expectation index” of the Chinese, which is gauged with a regular survey conducted by the
China’s National Bureau of Statistics. The U.S. expectation index was obtained from the
University of Michigan survey center, which also provides the monthly index for the American
consumer sentiment.
Methods
9 recession and news
The first step of the analysis is to examine the distribution of each variable. Also bivariate
relationship – with cross-tabulation and chi-squre tests – was investigated. We use vector
autoregression (VAR) models (Sims 1980; Freeman et al 1989) to evaluate the causal directions
of the dynamic relationships between media coverage, public economic expectations and
economic indicators. VAR is a particularly useful method when there is no clear theory as to the
directional association of the variables; i.e., when imposing structural restrictions on the model
cannot be easily justified. Such is exactly our case, in so far as we are interested in comparing the
U.S. and Chinese systems. Though, as mentioned above, we have some reason to believe that
economic evaluations may be driven by media coverage in the U.S., we are most concerned with
a comparison of these dynamic relationships in the U.S. and China. Little theory comes to bear
on dynamics at play in the Chinese system, which has been qualitatively described as very
different from the U.S. system (Hachten & Scotton, 2006). To that end, we make little in the way
of directional assumptions, and instead use VAR modeling to tell us which parameter restrictions
are appropriate for each system.
VAR has a number of benefits beyond its structural flexibility. Foremost, it provides
strong coverage of the history of the time series via multiple lag specifications across all the
variables in the model. Thus VAR is related to the original Granger causal approach (1969),
where each variable, all of which are treated as endogenous, are regressed on lagged values of
itself and lagged values of the other variables in the equation. We can then evaluate the causal
dynamics in the equation via Granger causality, which tests the joint hypothesis for blocks of
lags for each variable.
The Granger causality results can be further unpacked graphically with simulated impulse
response functions. Here, a shock to a single variable is introduced to the system, and the
10 recession and news
resulting wave of change in estimates for the remaining variables in the VAR equation is plotted.
While Granger causality is easy enough to interpret on its own, these impulse response functions
help illustrate the longevity and magnitude of the dynamics in the model. Specifically, each
variable is given a one standard-deviation shock and the response among the remaining variables
is traced over 8 months. We use Choleski decomposition to orthogonalize the responses, such
that both the instantaneous and lagged responses of the variables are traced. We also provide
95% confidence intervals, calculated via Monte Carlo simulation, on the response functions.
Because it is hard to compare units of measurement across economic indicators, economic
evaluations and media coverage, the measures used in the impulse response functions have been
standardized prior to plotting. Such allows for easier comparison of the magnitude and duration
of the shock.
It should also be noted that all of the economic variables are non-stationary, and they are
therefore first-differenced in all of the models below. Because of their trends in the series, the
natural logs of these variables are used in the models below as well. Thus the macroeconomic
variables are logged and differenced prior to modeling, and they can be interpreted as the logged
change in the economy or in economic expectations, respectively.
Results
In terms of quantity of stories, the U.S. papers appear to fluctuate dramatically, while the
volume of Chinese economic coverage seems rather stable month by month. Regarding news
topics, the press foci of the two countries look different too. For Chinese media, stock market
(24%) occupied about one fourth of the news space, followed by government policy/budget
(14%), official statement about the economy (11%), commodity price/inflation (9%), and foreign
11 recession and news
exchange rate (8%). The U.S. papers, on the other hand, focused more on government
policy/budget (26%), individual company performance (19%), stock market (12%), energy price
(10%), mortgage crisis (8%), and consumer sentiment (6%). It is interesting to note that the
front-page stories from the Chinese papers differ substantially from the stories inside, suggesting
a governmental intervention in the editorial decision on news placement.
Also worthwhile to point out is the different angles of the economic coverage. The U.S.
press overwhelmingly covered the economy from the domestic angle (76%), leaving only 15% of
the newshole to foreign economies or international issues. The Chinese press seemed to be more
internationally oriented, devoting roughly 20% of its space to covering foreign economies and
16% to transnational economic issues (X2=19.25 df=2 p < .001). The coded valence of economic
news also indicates an interesting pattern: the Chinese economic stories are slightly less negative
than the U.S. counterpart (47% vs. 69%) and also more likely than the U.S. press to be positive
(30% vs. 15%)(X2=56.94 df=2 p < .001). This phenomenon could be accounted for by the
difference in the economic situations and also by editorial intervention. More investigation will
be executed later to see whether the varied news coverage is linked to public expectation and
consumer sentiment toward the economy. The monthly opinion polls about the economic
expectation conducted by the Conference Board and U.S. consumer sentiment conducted by the
University of Michigan will be incorporated into the time-series analysis. More findings should
shed light on the intricate relationship between economic coverage and public opinion about the
economy: Does the press influence or reflect the public opinion about the economy?
We report the results of the VAR models in terms of Granger causality tests. We begin
with the U.S. case before turning to that of China. Both systems include the same variables, and
we conclude by contrasting the dynamics in the two countries.
12 recession and news
In order to properly specify the lag order in the VAR model, we used the final prediction
error (FPE), Akaike's information criterion (AIC), Schwarz's Bayesian informationcriterion
(SBIC), and the Hannan and Quinn information criterion (HQIC) for the vector autoregression
models. The results strongly suggested the use of three lags for the equations. We subsequently
tested the model with up to 5 lags with little change in the substantive results.
The results of the U.S. system for each of the three media coverage variables are
presented in Table 1 and Figure 3. The test statistics in Table 1 show that the expectations of the
U.S. economy are unaffected by the front-page coverage. In fact, expectations appear to be fairly
independent in the U.S. Contrarily, front-page coverage significantly predicts future changes in
the leading economic indicator. In the reverse direction, we see that front-page coverage
responds to both expectations and the leading economic indicator. The hypothesis that the
coefficients on the three lags of all other endogenous variables on the front page are jointly zero
can be rejected.
Tables and figures are about here.
The results from the media word counts and valence measures bolster the front-page
results. Other than the fact that both word count and valence border on a significant relationship
with expectations – to be sure, front-page nears significance as well – the pattern of dynamic
relationships evident in the front-page model are virtually the same with the other media
coverage measures.
Figure 3 unpacks these results in terms of impulse response functions. As evident from
the diagonal of the graph, the economic evaluation, economic indicator and front-page coverage
all exhibit strong inertia. Each of these variables’ current values are responsive to their own
previous values. We also see that most of the impulses die out quickly, meaning that even the
13 recession and news
significant shocks to the system do not last longer than a month for most variables. The
exception appears to be the effect of economic indicators on front-page coverage. An impulse in
the former takes a month before moving the latter, and then stays in the system for the third and
fourth month.
Table 2 and Figure 4 show the results of the VAR Granger causality tests for the same
model specifications, but this time in China. In this case, we find that the economic expectations
respond to both front-page coverage and the leading economic indicators. Indeed, Figure 4
shows that the response to the front-page is large, beginning to respond in the first month but
becoming most obvious 3 months after.
In general, the media in China appears to be rather isolated from the rest of the model.
Both the front-page coverage and the word count are unmoved by changes in the leading
economic indicators and economic expectations. The valence or tone of media coverage in China
is the only media aspect that responds to the leading economic indicators. In addition, none of
the media measures show any movement as a result of changes to economic expectations.
Among the most consistent findings in China, the VAR model shows that the leading
economic indicators respond to expectations about the economy. Thus we note a feedback loop
in China, such that economic expectations respond to the leading economic indicators and the
leading economic indicators respond to economic expectations. Figure 4 suggests that the more
powerful effect is in the direction of the economic expectation on the leading economic
indicators than vice versa. The economic expectation causes a movement in the economic
indicators to start immediately but becoming largest around the third month. Similarly, changes
in the economic indicators begin to change economic evaluations quickly but never amount to
the same magnitude as in the opposite direction.
14 recession and news
It is important to note here that while the impulse responses appear short, lasting usually
only one or two steps, such is not the case. Because the data is monthly any noticeable response
in the system is worthy of consideration. The substantive significance is that a change in one
variable’s monthly value affects the monthly value of another variable. The month long measures
are especially interesting in terms of the media, where any effect is unlikely for a full month
given the typical weekly news cycles. The evidence of a movement here is thus especially
impressive as it suggests a relatively long effect.
From a comparative perspective, our primary consideration here, we note some serious
differences between the U.S. and China. Foremost, the U.S. media appears very responsive to
both economic expectations and leading economic indicators. The Chinese media, however,
appears fairly well insulated from these variables. Only the media valence index shows a
significant response to Chinese economic expectations. By contrast, the media in the U.S.
appears very responsive to expectations and the state of the economy. The differed economic
situations in which China and the U.S. are in could be the contextual factor that should be
considered though. For the Chinese media, only the threat of recession was on the horizon; yet
for the American media, their entire country was mired in economic contraction.
In addition, we have found that the in the U.S. the leading economic indicators do not
respond to changes in economic expectations. In fact, economic expectations and the leading
economic indicators appear to be unrelated in the U.S., which is an unusual scenario that may
merit further investigation. However, in China economic expectations appear to Granger cause
the leading economic indicators. In addition, the relationship between these variables in China is
reciprocal, thus the leading economic indicators cause economic expectations as well, though to
a much lesser extent than vice versa.
15 recession and news
Conclusion and Discussion
This study unveils the different patterns of economic coverage between China and the
U.S. They differ in topic, focus, volume, as well as valence. While these two countries might
have faced different economic issues, it is plausible that the varied press systems may be
attributed to the difference of coverage. This finding seems to lend support for the argument that
economic news is far from scientific; it has something to do with numerous human factors –
press system, editorial judgment, and governmental policy. It is also interesting to note that the
economic news in China does not follow the leading economic indicator or the public sentiment,
suggesting that news coverage in China is still controlled and manipulated by the authorities to
advance their interests and goals.
The U.S. media appear to do a better job in following the economic condition and
reflecting the public sentiment. But, ironically, U.S. economic news also led to economic
indicator. In other words, in one way or another, news coverage about the economy affected the
economic performance per se. Given this, U.S. media simply cannot shrug off the accusation of
“media malady.” More research on this should be implemented. But the U.S. media would need
to be more forward looking, internationally focused, and avoid sensational, exaggerated
reporting, which could be at fault.
The finding about China’s economic indicator being affected by the public expectation
(but not in the U.S.) is intriguing. Adding the source that drives expectation – economic news –
completes the whole picture, which makes one wonder if government-backed propaganda does
work in economic growth. It is unlikely that the U.S. media would be happy to succumb to
government control; but the lesson of it suggests that the government may need an effective
communication plan to advance its economic plan. Perhaps it is an area that the U.S. government
16 recession and news
would need to work on to get the country out of the risk of double-dip recession. In fact, the
repeated appearance of this phrase in the media may have some impact on the confidence.
There are a number of shortcomings of this study that need to be addressed. This study’s
sample size (24 observations) is short for a normal time-series analysis. So, an increase of the
sample size could be helpful. Another weakness of the study sample is the lack of Internet-based
and electronic media, which could be more powerful in facilitating economic communication
than print media. Lastly, as with any monthly data, the interval (month) is probably not as
sensitive as other shorter observation units (week or day). But this is a necessary compromise.
17 recession and news
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19 recession and news
Figure 1: Media Dynamics in the US and China
20 recession and news
Figure 2: Macroeconomic Indicators and Sentiment Dynamics in the US and China
21 recession and news
Table 1
United States: VAR Granger Causality Models
Front-page economic news (front page)
Equation
Excluded
chi2
df Prob > chi2
expectation
expectation
expectation
frontpage
lei
ALL
5.9326
2.8488
8.7962
3
3
6
0.115
0.416
0.185
frontpage
frontpage
frontpage
expectation
lei
ALL
13.297
27.705
33.484
3
3
6
0.004
0.000
0.000
lei
lei
lei
expectation
frontpage
ALL
3.9384
11.804
12.198
3
3
6
0.268
0.008
0.058
Equation
Excluded
Expectation
Expectation
Expectation
word count
lei
ALL
7.5672
4.8565
10.605
3
3
6
0.056
0.183
0.101
Word count
Word count
Word count
expectation
lei
ALL
13.322
20.458
26.562
3
3
6
0.004
0.000
0.000
lei
lei
lei
expectation
word count
ALL
3.3718
9.5687
9.9366
3
3
6
0.338
0.023
0.127
Word count
chi2
df Prob > chi2
Valence index
Equation
Excluded
Expectation
Expectation
Expectation
valence index
lei
ALL
6.6611
4.3019
9.6021
3
3
6
0.084
0.231
0.142
expectation
lei
ALL
9.4436
19.575
21.397
3
3
6
0.024
0.000
0.002
expectation
valence index
ALL
2.5016
13.417
13.831
3
3
6
0.475
0.004
0.032
Valence index
Valence index
Valence index
lei
lei
lei
chi2
df Prob > chi2
22 recession and news
Table 2
China: VAR Granger Causality Models
Front-page economic news
Equation
Expectation
Expectation
Expectation
Excluded
frontpage
lei
ALL
chi2
8.7591
4.2686
11.225
df Prob > chi2
1
0.003
1
0.039
2
0.004
frontpage
frontpage
frontpage
expectation
lei
ALL
.73026
.0511
.74693
1
1
2
0.393
0.821
0.688
lei
lei
lei
expectation
front page
ALL
16.251
.42088
16.258
1
1
2
0.000
0.516
0.000
Equation
Expectation
Expectation
Expectation
Excluded
word count
lei
ALL
chi2
4.4739
2.728
6.5849
Word count
Word count
Word count
expectation
lei
ALL
.48544
.46195
1.0468
1
1
2
0.486
0.497
0.592
lei
lei
lei
expectation
word count
ALL
15.974
.26163
15.981
1
1
2
0.000
0.609
0.000
Equation
Expectation
Expectation
Expectation
Excluded
valence index
lei
ALL
chi2
.30748
1.2298
2.0732
Valence index
Valence index
Valence index
expectation
lei
ALL
.16355
17.092
18.358
1
1
2
0.686
0.000
0.000
expectation
valence index
ALL
11.831
3.6509
21.875
1
1
2
0.001
0.056
0.000
Word count
df Prob > chi2
1
0.034
1
0.099
2
0.037
Valence index
lei
lei
lei
df Prob > chi2
1
0.579
1
0.267
2
0.355
23 recession and news
Figure 3: Orthogonalized Impulse Response Functions for US Front-page VAR
24 recession and news
Figure 4: Orthogonalized Impulse Response Functions for China Front-page VAR