Li Keiqang index improves

From Credit Suisse:

Credit Suisse’s Li Keqiang Momentum Index is pointing in a positive direction again in May. This offers bottom-up evidence of China’s overall GDP being on track for stabilisation in 2Q15.

● Our calculation, based on the Li Keqiang Index, suggests that the economy is growing at a pace of 6.5–6.8% on a seasonally adjusted annualised basis (saar). This marks a significant improvement, compared with the prior quarter’s 5.3%.

● However, we have not observed a visible rebound in private investment growth. We believe China needs structural reform to revive private sector investment in order to achieve a sustainable rebound in growth.

● We believe the stabilisation in growth in the coming quarters is unlikely to take full-year GDP growth to the government’s 7.0% target. Thus, we expect policymakers to remain in a pro-growth mode.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.