China: Rebound continues for growth and inflation leading indicators

Our leading indicators for the Chinese growth impulse and inflation both continued to recover over the past month. The improvement in our PPI leading indicator is particularly notable in the context of China’s anti-involution efforts. It remains to be seen how quickly it will turn positive.

Chinese assets are also corroborating the constructive outlook. Chinese small caps have outperformed large caps, while 10y yields have bottomed.

The labor market is also going from terrible to slightly less terrible, with the CKGSB recruitment index starting to recover from multi-year lows.

On the political front, the US and Chinese have continued to take steps to de-escalate and reduce tail risks. Chinese Premier Li Qiang described US-China relations as like a married couple who bicker but ultimately need each other (link).