China announced on Friday its gross domestic product slowed to a pace just north of 8% in the first quarter, but like most economic readings that come out of the Asian giant, investors are taking it in with a grain of salt.

While no smoking gun has emerged, there is a general sense in the financial community that China, like some other frontier economies have in the past, may artificially inflate the numbers in its official statistics.

“I think there is a sense that the data we get out of China is somewhat suspect in that it is to some degree subservient to political objectives,” said Peter Kenny, managing director at Knight Capital.

The cynicism, which is only fueled by China’s closed society, poses serious obstacles for investors attempting to ascertain what’s truly going on under the hood of this crucial economic engine.

Asked about China’s 8.1% GDP growth, Gordon Chang, author of The Coming Collapse of China, told FOX Business, “I don’t know how they got to 8.1%. They just made that number up from thin air,.”

None of this is to say that the broader investment community believes China is completely cooking the books and its economy is actually shrinking.

Transparency Questions Persist

Through a slew of metrics, especially its voracious appetite for raw materials like aluminum and copper, it’s clear that China has some serious economic muscle.

“The world knows that China is the fastest growing economy. The trends are impossible to argue with. It’s around the edges,” said Kenny. “Are some sectors of the economy weaker than we’re being told? Is real estate more of an issue than we’re being led to believe?”

Given China’s enormous influence on the global economic stage, it’s hard to downplay how important these “around the edges” statistics are.

Reliable data on vacancy rates and home prices could help investors determine whether or not China is in the midst of a serious housing bubble that could cause its economic expansion to grind to a halt and sap global demand for commodities.

“Transparency is always one of the foundational underpinnings of making intelligent asset allocation decisions,” said Kenny. “If you don’t know enough about the real-estate sector in China to make a thoroughly informed decision, how much of your capital do you put in place?”

More of an Art

Some investors were able to use various metrics to make what turned out to be very valuable bets against the U.S. housing market in 2006 and 2007 before it imploded. Those same investors might feel less comfortable making bullish or bearish bets in China’s housing market today due to doubts about the accuracy of the data.

Skepticism in some corners runs so deep that some investors use proxies for economic growth like electricity consumption as a more reliable gauge.

In some ways, it would make sense for China to be less than forthcoming about stats that provide evidence its previously red-hot economy is slowing down.

“Wherever there are expectations for growth, there is pressure on authorities to deliver to attract capital,” said Kenny. “When there is a hiccup, it’s only human nature to not want to showcase that.”

Still, even with a healthy dose of cynicism, economists are able to get a general feel for which direction China’s economy is going, even if the precise numbers are off.

“To me, whether it’s 8.1% or 8.3%, it is negligible,” said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman. “It’s not reliable at all times…but you can at least glean something on the qualitative aspects of growth.”

Et tu, Greece?

Of course, China is hardly the only country that investors have had doubts about the economic data streaming out of. In fact, many frontier economies have issued questionable statistics at some point.

“It’s more of an art than a science in terms of digesting emerging-market data,” said Thin.

Even some so-called modern economies have been caught red handed on this issue.

Greece infamously lied to the world about its public debt as it attempted to gain entry to the now-reeling eurozone. This disastrous downplaying of economic reality helped spark Greece’s debt debacle that could yet still bankrupt the country.

Kenny said, “If it can happen in Greece, in the EU -- the most regulated economy outside of a planned economy -- who is to say it can’t happen in a planned economy” like China’s?

And Greece’s 2011 nominal GDP of $305 billion is just a fraction of China’s $7.3 trillion economy, which is second only to the U.S.

Each time a new government takes control in Spain and Portugal they seem to “uncover” new evidence showing a deeper deficit than the prior government had acknowledged, said Thin.

Another example of data fudging is Argentina, which publishes inflation data that should make its economists’ pants light on fire. INDEC, the country’s official statistics arm, has been criticized for attempting to placate a population that knows a little something about hyperinflation.

“Misreported prices have cheated holders of inflation-linked bonds out of billions of dollars,” reads a February note in The Economist explaining why the magazine has decided to stop publishing INDEC’s figures entirely. “We are tired of being an unwilling party to what appears to be a deliberate attempt to deceive voters and swindle investors.”

While there may be little hope in the near future for Argentina’s official stats, the situation does seem to be getting better in China.

Thanks to pressure from some financiers and prodding from the International Monetary Fund, China has improved its reporting and transparency.

“The sense is it’s getting more transparent because it’s being demanded by investors,” said Kenny.

Follow Matt Egan on Twitter @MattMEgan5