China's Promise Of Reform Yet To Impress Traders

Authored by Simon White, Bloomberg macro strategist,

Stock index futures in the FTSE China A50 are so far up a little (amid some volatility) as the 2023 Central Economic Work Conference takes place in China.

Like many government announcements – in China or elsewhere - they’re just talk, and not all may work as intended, or even be properly followed through.

That’s why watching the hard data is key to know for sure that any promulgated reforms are actually working.

One of the best in China is real M1 growth, a broad measure of money supply.

It leads the economy, and has caught most of the cyclical ups and downs in China over the last two decades.

It has yet to show a convincing sign of turning up, but when it does it will be much surer sign reforms in China working.

Obviously the stock market may bottom before that, which is why looking for signs of capitulation in breadth, collectively a group of indicators that show how broad index gains are distributed, is equally as important for investors as tracking potential reforms and following the money.