A Chinese business research org, after four years of effort, comes up with a new monthly index of leading indicators designed to give the public--and government--some deeper sense of where things are headed economically. The government's stats are notoriously patchy, so the Conference Board came up with six:
- Expectations of consumers
- Lending by banks
- Supply of raw materials to industries (central bank survey)
- New floorspace being constructed
- Export orders received by firms
- Supplies delivered to exporting firms.
But because even that leading index is considered a bit crude, the Board simultaneously puts out a monthly current or "coincident" index. The current index is more volatile than the leading one, because Chinese bureaucrats have a tendency to smooth out reality in their data.
The proof in the pudding? The Board retroactively applied the indices all the way back to 1986 and showed how it would have predicted the major downturns since.
A nice little step toward managing things better.
Take away: we have the tendency to assume China's leadership somehow knows more about its economy than our leadership does about ours. The truth is the exact opposite.