Abstract
In many countries, composite indexes of leading economic indicators (LEI) are used to help predict short-term cyclical fluctuations of the economy in conjunction with composite indexes of coincident economic indicators (CEI). They also serve to analyze short-term macroeconomic dynamics of the business cycle. Predicting turning points in the business cycle is extremely challenging, but the long history of research on leading indicators provides empirical evidence that LEIs can help in this task. This chapter describes the process behind the construction of one of the most challenging-to-construct indexes for China. We discuss The Conference Board’s selection of leading indicators of the Chinese economy since 1986 and how this selection evolved after the initial publication of the LEI and CEI for China. Chronologies of business and growth cycles are used to evaluate the selected indicators.
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Notes
- 1.
- 2.
Cai (2000) reports on data falsification in provincial data.
- 3.
According to China’s National Bureau of Statistics (NBS), there are three steps of accounting procedure in releasing official figures of GDP, namely, preliminary accounting, preliminary verification, and final verification. The results are released 20 days after accounting quarter, 45 days after accounting quarter, and the end of December next year when the annual final data are confirmed, respectively, for each revision step.
- 4.
China’s National Bureau of Statistics (NBS) has published fixed-base CPI since 2000 in China Monthly Economic Indicators but unexpectedly ceased in 2006.
- 5.
- 6.
Therefore, even though the empirical performance of this indicator in China did not show marked cyclical contractions, it was included in the selected coincident indicators. This or related series on energy production are also used by several Chinese agencies as coincident indicators (e.g., SIC, NBS).
- 7.
Transportation output indexes for the US economy have been shown to have strong cyclical characteristics often corresponding to growth cycles; see Lahiri et al. (2003).
- 8.
The monthly change is calculated using a symmetric percent change formula. For details see Ozyildirim (2018).
- 9.
We experimented with several other combinations of coincident indicators, but in all cases the dates of the recession that was identified remained the same. Details can be found in the working paper online.
- 10.
See the working paper online for more detailed information on each of these potential candidates Adams et al. (2010).
- 11.
See The Conference Board press release at https://www.conference-board.org/data/bciarchive.cfm?cid=11&pid=3912
- 12.
In addition to the economic reasoning behind the selection of the components, we also checked the robustness of our selection by comparing the turning points of the indicators with the turning points of the CEI (both in detrended form). See Adams et al. (2010) for more on the robustness of the selection.
- 13.
See Adams et al. (2010).
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Appendix
Appendix
Source: The Conference Board Business Cycle Indicators’ Database for China
Source: The Conference Board Business Cycle Indicators’ Database for China
Source: The Conference Board Business Cycle Indicators’ Database for China
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Ozyildirim, A. (2019). Tracking Business and Growth Cycles in the Chinese Economy Using Composite Indexes. In: Smirnov, S., Ozyildirim, A., Picchetti, P. (eds) Business Cycles in BRICS. Societies and Political Orders in Transition. Springer, Cham. https://doi.org/10.1007/978-3-319-90017-9_25
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