China Growth Tracker: How Fast Is China Reopening?

We published a note on how to track Chinese growth in real time using financial and commodity market prices. In these weekly reports, we update the indicators to help us track growth.

Summary

• We create a new high frequency index to track China’s rapid reopening. We note that the economy has only just returned to the same activity levels seen throughout 2022.
• China is experiencing a bumpy road to recovery. Our market data-based tracker has stalled, falling 2 points over the past two weeks, with copper proving the only bright spot (Chart 2). Meanwhile, our economic data-based tracker has fallen through December with new orders slumping to end 2022 (Chart 3).

Measuring China’s Reopening

The China reopening has been hot news over the past month. 1.5 billion people, previously under strict zero-Covid rules, were allowed to return to (semi-)reality. Now, with Chinese New Year celebrations almost over, it is a good time to measure whether the reopening has really happened.

We have handpicked an array of data points, ranging from congestion indices to box office revenues, and found that while the recovery has certainly been rapid, it has only just returned to 2022 norms. The recovery has a way to go yet.

What About the Economy – Has That Recovered Yet?

• Our market-based tracker has stalled over the two past week (Table 1). It has fallen 2 points over the period with yearly growth across iron ore, oil, and Chinese 10-year yields retreating. Copper proved the only bright point.
• Meanwhile, our economic data tracker continued to weaken (Table 2). After a hopeful November, new orders sank across the economy, though it gave non-manufacturing backlogs a chance to catch up – they remain at contractionary levels. Lastly, electricity production touched 20 points higher.
• Not forgetting Covid-19, Wu Zunyou, the Chief Epidemiologist at the China Centre for Disease Control and Prevention, believes a second wave is ‘unlikely’.

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

Ben Ford is Researcher at Macro Hive. Ben studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)