New Suite of Text-Based Macro Indicators

We have developed a new suite of text-based macro indicators that foreshadow movements in economic and financial variables and capture signs of slowing economic activity and uncertainty in China. These indicators offer a strong alternative approach for quantifying economic and policy risk that may be difficult to capture with more conventional tools. For more, check out our introduction below.

Why text-based indicators?

Most economic and financial analyses on China have tended to focus on numerical data or offer manual qualitative interpretations of policies and reports. Many of these approaches have, in our view, performed rather subpar when it comes to capturing recent bouts of volatility and risk in China’s markets, such as the collapse in tech-related equity prices in 2021 and the defaults of several real estate developers over the last two years. Quantitative text-based analysis can offer a powerful alternative approach for quantifying economic and policy risk that may be difficult to capture with more conventional tools. Our text-based macro indicators tend to have a statistically significant impact on a range of Chinese and global economic and financial variables.