Meas­ur­ing China’s new eco­nomy

Source: The Edge Singapore, Press Reader

Update: Jul 27th, 2026

Photo: Shutterstock

Chinese eco­nomic fig­ures are like a Chinese ban­quet. You can select whichever morsels you prefer from a range of dishes. Accord­ing to many com­ment­at­ors, the latest eco­nomic fig­ures show that the Chinese eco­nomy is in dire straits, strug­gling to sur­vive. More advanced eco­nomic ana­lysis points to a K-shaped eco­nomy, with some parts going up and some parts going down.

For other com­ment­at­ors, the fig­ures show a steady eco­nomic situ­ation with slow improve­ment.

Des­pite con­fid­ent pre­dic­tions that star­ted more than 20 years ago—and which have been repeated every year since—there is no com­ing col­lapse of China. Instead, we are watch­ing an eco­nomy evolve into a new eco­nomy. Pres­id­ent Xi Jin­ping talks of the “new qual­ity pro­duct­ive forces”. These are not empty words, but there is not yet any agreed way to meas­ure this eco­nomic impact.

The advanced digital eco­nomy in China is not reflec­ted in the eco­nomic fig­ures used to com­pile GDP meas­ures. The GDP fig­ures do not cap­ture the dra­matic changes in pro­ductiv­ity.

Remem­ber when there were mul­tiple steps involved in pro­cessing payroll? First, staff in the accounts depart­ment cal­cu­lated employ­ees’ pay. Someone had to take an hour to go to the bank and col­lect cash. In a locked office, the cash was coun­ted and put into indi­vidual pay pack­ets for each employee. Then, employ­ees had to go to the bank to deposit

their wages. Even in the effi­cient firms which paid salar­ies by cheque, there were sev­eral staff required to print and author­ise each cheque.

Today, hours and com­plex pay rates are cal­cu­lated by soft­ware, auto­mat­ic­ally integ­rated into com­pany accounts, and the money is elec­tron­ic­ally trans­ferred.

Such changes pro­duced an increase in pro­ductiv­ity, but it was not dir­ectly meas­ured in eco­nomic accounts.

Speak­ing in rela­tion to West­ern eco­nom­ies, Paul Donovan, chief eco­nom­ist at UBS Global Wealth Man­age­ment, notes: “We can’t trust the eco­nomic data any­more.

“So much struc­tural change is hap­pen­ing, which we’re miss­ing. We’re miss­ing a lot of the abil­ity to meas­ure pro­ductiv­ity gains that are tak­ing place, we’re con­stantly under­es­tim­at­ing eco­nomic activ­ity, which means we’re under­es­tim­at­ing pro­ductiv­ity gains.”

China is much fur­ther along the path of eco­nomic restruc­tur­ing. The

changes wrought by the digital and AI eco­nomy are greater, but remain largely unseen and unac­coun­ted for by the exist­ing yard­sticks of eco­nomic meas­ure­ment.

We still use the tra­di­tional meas­ures of eco­nomic activ­ity, count­ing steel pro­duc­tion, elec­tri­city con­sump­tion and retail sales from registered

. busi­nesses. The res­ult is that the tra­di­tional meas­ures of GDP and pro­ductiv­ity do not reflect the true eco­nomic situ­ation. This mis-meas­ure­ment feeds the West­ern nar­rat­ive that the Chinese eco­nomy is in trouble.

This is the fourth indus­trial revolu­tion. The new digital eco­nomy is going to require new meas­ures of suc­cess because the exist­ing GDP meas­ures are no longer fit for the pur­pose. Until they change, the real growth in the Chinese eco­nomy will not be meas­ured accur­ately.

To be sure, the old met­rics and eco­nomic meas­ure­ments are import­ant, but they no longer tell the full story.

Tech­nical out­look for the Shang­hai mar­ket

The rapid fall last week car­ried the Shang­hai Index below sup­port near 3,900 and tested sup­port near 3,780. The rebound from this level — shown as line C — has been a rapid move towards 3,900, which is now act­ing as a res­ist­ance level.

This is a strong rebound, but it must be treated as a rally within the con­text of a down­trend. A sus­tained move above res­ist­ance near 3,890 — shown as line B — is required before we can call a new uptrend.

A retreat and fall below 3,780 has sup­port near 3,650, shown as line D.

The down­trend line 1, pro­jec­ted from its start on May 15, has also provided a sup­port point for the most recent mar­ket retreat. The com­bined sup­port fea­tures of the trend line and line C sup­port near 3,780 sug­gest there is a higher prob­ab­il­ity that the mar­ket rally can con­tinue and move above res­ist­ance near 3,890.

However this does not elim­in­ate the poten­tial for a retreat and retest of sup­port near 3,890 prior to another rally.

This bear­ish out­look is sup­por­ted by the rela­tion­ships in the Guppy Mul­tiple Mov­ing Aver­age indic­ator. The long-term group of aver­ages has turned down and is spread­ing. This is usu­ally asso­ci­ated with strong investor selling.

The short-term group of aver­ages are well sep­ar­ated, show­ing strong sup­port from traders for con­tin­ued sell-offs. Com­pres­sion shows traders have become buy­ers.

These rela­tion­ships sug­gest that a rally and retreat devel­op­ment is the most prob­able out­come of the cur­rent index activ­ity. There are no RSI diver­gence sig­nals for a trend change. Traders will look for a retest and con­sol­id­a­tion around 3,780 before pos­i­tion­ing for a new uptrend.

Daryl Guppy is an inter­na­tional fin­an­cial tech­nical ana­lysis expert. He has provided weekly Shang­hai Index ana­lysis for main­land Chinese media for two dec­ades. Guppy appears reg­u­larly on CNBC Asia and is known as “The Chart Man”. He is a former national board mem­ber of the Aus­tralia-China Busi­ness Coun­cil. He owns Chinese stock and index ETFs.