Leading indicators are sentiment indicators or economic indices that measure current economic conditions and outlook for upcoming months. According to OECD leading indicators China is clearly the engine of the whole world economy.
Source: GnsEconomics, OECD, BIS
We can see on the chart data from the beginning of 2015 for China, US, Germany and Eurozone. We can see that the development of the Chinese index is in time followed by the other indices with a time lag of approximately 3 to 4 months. It is clearly evident that Chinese economy development is absolutely paramount for the development of world economy GDP growth dynamics. It is advisable to add that Chinese growth contributes to the whole world economy growth by the unprecedented one third. Figuratively speaking if China were given flu the world economy would at least get pneumonia. We believe China long term and have Chinese equities significantly overweighted against benchmarks in our investment portfolios.
Michal Stupavský
investment strategist