China is the world’s second largest economy behind the United States. While there are a variety of economic indicators its rapidly changing economy is not easy to understand and assess, often lacks transparency and leaves economists, analysts, bankers and investors alike scratching their heads. Legendary fixed-income fund manager Bill Gross once called China “the mystery meat of emerging-market countries,” in an interview with Bloomberg Television.

Here, we go over some of the economic indicators used to measure China's economy.

First, Some History

Since the late 1970s, China has evolved from Communism to a centrally controlled capitalist market. Its economic transformation began in 1978 when capitalist market reforms were introduced. In the decades that have followed China has transitioned from a rural agricultural economy to a manufacturing or industrial and consumer or service-oriented economy. It is the largest agricultural and manufacturing economy in the world.

China continues to rebalance its economy. The focus now is more on domestic consumption versus industry and exports. As the world’s most populous country, with 1.4 billion people, its consumer purchasing power is widely watched. After experiencing double-digit growth for decades China’s economy is beginning to slow down. Its gross domestic product (GDP) grew in the single digits. But this is seen as a maturing of its economy.

What follows are some of the most common economic indicators watched by those who track the Chinese economy.

China's National Bureau of Statistics

While they are widely watched and reported, the accuracy of economic indicators provided by government run the Chinese National Bureau of Statistics (NBS) is often questioned and the subject of controversy. Indeed Li Keqiang, Premier of the State Council of the People's Republic of China and an economist has said that the data is unreliable, according to documents made public by WikiLeaks in 2010.

The NBS measures China’s GDP via three broad sectors. They are primary industry (agriculture), secondary industry (construction and manufacturing) and tertiary industry (the service sector). There are a variety of sub sectors that fall under each broad sector.

The OECD

The influential Paris-based Organization for Economic Cooperation and Development (OECD) provides Composite Leading Indicators (CLIs) for economies around the world including China (for an up-to-date table, click here).

The aim of the OECD’s CLIs, which are published monthly, is to provide early signs of growth or a slowdown in economic activity. The OECD uses a wide variety of data to indicate changes in China’s economy. Widely watched it is considered a more dependable economic indicator for China than NBS data.

The Conference Board

Also widely followed are not-for-profit research organization The Conference Board’s economic indicators. Since 2010 it has published The Conference Board Leading Economic Index (LEI) for China, which signals turning points in China’s economic cycles.

The index aggregates six economic indicators, ranging from manufacturing to credit, that measure economic activity in China. It gets its data from the National Bureau of Statistics and the People’s Bank of China.

HSBC Manufacturing Index (No Longer in Use)

The HSBC Manufacturing Purchasing Managers Index (PMI) was another widely watched gauge of China’s economy. It was considered an early indicator of the economic strength of China’s manufacturing sector and is published monthly. Remember, China is the largest manufacturing economy in the world. Any reading for the index above 50 meant expansion from the previous month, while a reading below 50 indicated contraction.

HSBC stopped publishing China's flash PMI in 2015.

The Bottom Line

While there are a variety of economic indicators to help you keep your fingers on the pulse of China’s economy, it can still be difficult to understand and assess, even for financial professionals. But by utilizing research from the OECD, The Conference Board, and the National Bureau of Statistics, investors can collect some baseline economic information that can help with decision-making.