Explanations on Compilation & Release of the "China Export Leading Indicator"
1. What is the China Export Leading Indicator?
For China's export activities, the export trend can be predicted by means of the macro-economic indicators including the real effective exchange rate of CNY, processing trade import, foreign direct investment, OECD leading index, and changes in demand from major markets, as well as micro-economic indicators such as enterprise orders, confidence and cost. The China Export Leading Indicator, abbreviated as ELI, is a monthly composite indicator derived from all those indexes aforesaid and applicable to prediction of China's export trend for the coming 2 or 3 months, which is therefore regarded as the "barometer" of the export trade.
2. Why to compile China Export Leading Indicator?
For five consecutive years since 2009, China's merchandise export value has been ranked first in the world. From 2012, the value began to exceed 2 trillion U.S. dollars. The export trade not only helps enhance China's domestic economy but also deepens the integration of and interaction between the China economy and the world economy. Nevertheless, in recent years, China's export trend has been under the impact by more and more factors at home and abroad. Therefore China's central leadership, macro-economic administrations, and enterprises have to take efforts to make accurate, timely research and judgment of the export trend.
In January 2013, China Customs began to monthly release the "Export Managers Index" including three sub-items of "Export Orders Index", "Export Confidence Index" and "Export Cost Index", playing a certain role in the judgment of the export trend. But that prediction has certain limitation because the compilation is restricted to web-based questionnaire to enterprises, which are at the micro level, without any leading indicators at the macro level. The Export Leading Indicator makes up for this deficiency and ensures better and more accurate predictions and judgments of the future export trend.
3. Ideas and Steps in the Compilation of the China Export Leading Indicator
First, study and select existing leading indicators. Based on qualitative and quantitative analyses, the Customs select 7 macro indicators such as the processing trade import, import price index, manufacture foreign direct investment, export container freight index, CNY's real effective exchange rate, OECD leading index and main export markets' demand situations (including Consumer Confidence Index and Manufacture Purchasing Managers Index), all of which can play a leading role in exports, and then incorporate them into the Export Leading Indicator system (see the chart annexed hereto).
Second, the Customs obtain unique micro leading indicators through questionnaire survey. By scientific sampling, nearly 2,000 export enterprises from nationwide (they have 37% share of gross export value) are selected to take monthly online survey; by using the diffusion coefficient method, calculate "New Export Orders Index", "Export Managers Confidence Index" and "Export Enterprises Composite Cost Index"; and then work out the "Export Managers Index" through weighted synthesis.
Third, through statistical processing, synthesize all of the aforesaid leading indexes into one leading indicator, with its value between 0 and 100. The rise of the indicator's value denotes that the export situation for coming 2 or 3 months tends to be pleasant, while any fall in the indicator denotes that the export will be faced with certain downturn.
Annex: Architectural System of China Export Leading Indicator
Source: China Customs
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