The business cycle analysis in China
and challenges after the financial
crisis
Li Kai,
State Information Center, China
Content

Progress of business cycle analysis in China

Challenges in business cycle analysis Chinese
BI faces after the financial crisis
Progress of business cycle
analysis in the China
Study on business cycle in China started relatively late, just from late
1980’s. Major providers and publishers include:
Central bank, saving customer survey, economist survey and industrial
company survey;
NBS, survey on industrial and service firms from late 90’s; consumer
surveys;
Information Center of commerce, PMI based on business survey;
NDRC, monthly workshop joined by 7 business cycle analysis providers;
SIC, quarterly business survey on 5000 manufactures from 1990s;
monthly business cycle analysis from 2004, publish leading and coincident
index monthly.
Application of business
cycle analysis in the China
Now, business cycle index are published regularly in China by
different agencies on price, investment, consumption, saving, foreign
trade and performance of leading industries.
Additionally over 30 provinces and cities publish relevant regional
business cycle index regularly as well.
Basic procedures of composing
CI and DI by SIC
Key steps in composing index

指标的选取 selection of component indicators

数据的处理 data processing, seasonal adjustment

基准周期的确定 setting up the baseline cycles

景气指数的生成 composition of business cycle indicators

先行、同步和滞后指标（指数）的确定 set up Leading,
Coincident and Lagging indicators

景气变动趋势预测 forecast of economic trend

警度的确定 determination of warning criteria
Major components of the macro
business cycle index by SIC
Leading Index
Coincident Index
1．financial institutions loans
1. Industrial Added Value (Comparable Price)
2. New project in fixed assets construction
2．Power Generation Production
3. Money supply (M1)
3．Total Volume of Fixed Assets Investment
4. Cash flow by industrial producers
4．Fiscal Revenue
5. Final product inventory
5. Export Growth
6. Output of steel, automobile
6. Sale of consumer goods
Challenge1 BCI faces after
the financial crisis
Economic restructuring changes properties of
component indicators, and their relationship.
Major economic changes:
demographic dividend declining, industrial promotion, service
sector enhancing, trade balanced, urbanization, western region
Development, etc.
Challenge 2 in China after
the financial crisis
“Stimulate” policy impacts more prominent
with shorter term of leading index, which
makes the lagging term between LI & CI
shorter.
Shorter term between LI & CI
leading Index (red) , coincident index (blue)
Ⅲ challenges China face
post-crisis
The impact of macro-economic policy in the business cycle index
exists and grows to be more prominent in the past economic crises. For
example, the leading term of leading index is 8 months in 1997-2008.
However, after the proactive macro-economic policies were adopted in
response to the global financial crisis by the Chinese government,
during 2008 to 2011, the leading period of leading index is only 2
months. By now, the period has recovered into 5 months with diluted
impacts of stimulating policies. It should be noted that the change of
leading term of leading index can affect the prediction accuracy of
business cycle index.
Challenge 3 in China after
the financial crisis
Overlapping of three cycles brings difficulties
to follow the past criteria for monitoring and
warning the economy.
Monitoring index of
macro-economy
Comprehensive monitoring index
Ⅲ challenges China face
post-crisis
In the post-crisis period, Chinese economy is now facing
transformation from higher growth into a medium rate of economic
growth with profound changes in lower saving rate, fewer labor supply,
accelerating urbanization, less spillover effect of foreign trade and
increasing constraints on environment. The limit set of monitoring
system may face a dilemma against such a context, that is, how to
balance between the current economic situation and the observation in
a historic view.
Thank you!