China Growth Tracker: Markets Diverging from 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

• Our new high-frequency China reopening index continues to rally higher, surpassing 2021 peaks. However, it is fast diverging from our market data-based tracker suggesting markets have yet to fully price the reopening (Chart 1).

A Bumpy Road to Recovery

With little possibility of new Covid-19 variants circulating in China, markets should remain focused on the reopening. Our high frequency China reopening index indicates activity is now above peak 2022 levels (Chart 1).

However, this sits in contrast to our markets data-based China growth tracker, which has fallen a further 29 points over the past two weeks. The tracker sits at -60 points, it reached a cycle low of -83 points through 2022. While a large portion of the move is attributable to the Baltic Dry Index, all other components are also weakening (Table 1).

Our economic-based China growth tracker is flat over the past two weeks with no new updates (Table 2).

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.

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(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.)