The China (Trade) Syndrome


K.P. O'Reilly PhD, JD

K.P. O'Reilly PhD, JD

The China (Trade) Syndrome

June 10, 2019

Chinese Economic News Sentiment Battered by Trade Impasse

At the start of 2019, sentiment for news stories covering Chinese economic uncertainty was slowly, but steadily improving as data suggested that the government’s stimulus efforts were helping to avoid a much worried about hard landing for the Chinese economy. As is often the case with news on emerging markets, the paradigm of “no news is good news” rang true as declining news coverage over the course of Q1 into mid-April coincided with an upward trajectory for sentiment, which moved into the neutral band (-0.5 to 0.5) (Figure 1). Indeed, April 28 recorded the highest sentiment score of the year and the highest since before January 1, 2017. Alas, this would be just days before U.S.-China trade negotiations would stalemate.

Looking at broad measures of confidence about the Chinese economy, we see a similar market reaction at the start of the year. Both Chinese 5-year CDS spreads and the Shanghai Stock market (via the SSE Composite Index) reflected improving investors’ perceptions on the Chinese economy (Figure 2). The SSE Composite Index had been marching higher since the start of the year, while Chinese 5-year CDS spread steadily declined, falling to year lows in mid-April. With the demise of positive news on the trade front, both have reversed course, giving up much of their advances.

The dramatic deterioration in news sentiment starting on April 29 is readily self-evident, however, in looking deeper, the resulting free fall, ultimately sending sentiment to new lows on the year, tracks with breaking headlines on the trade impasse and escalating reciprocal trade actions by the U.S. and China (Figure 3). As shown, there was a sharp negative plunge in sentiment with a mirroring rise in global news coverage. The near-daily frequency of trade-related news kept downward pressure on sentiment. Notably, during the brief reprieve from May 16 to May 31, we experienced a declining volume of news coverage accompanied by a slight recovery in sentiment. Nevertheless, recent news at the start of June has pushed sentiment even lower.

Going forward, no resolution, either positive or negative, on the U.S.-China trade issue is likely until the G20 summit meeting at the end of June. Even then, markets should only expect a short-term reprieve pending a return to the bargaining table by both sides. While US officials have expressed hopes that talks will resume from their previous endpoint, one can’t rule out the possibility of starting from scratch. Meanwhile, news sentiment on Chinese economic uncertainty will likely persist at or near present low levels so long as the current vitriol continues and continue as a drag on Chinese assets and weigh on US markets as well.



To download the PDF version, click here: 2019-06-10 The China Syndrome Research Note




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News coverage and sentiment data used in this report was obtained from the Global Database of Events, Languages and Tones (GDELT). Launched in 2011, GDELT is the biggest open data database of political events in the world. Updating every 15 minutes, GDELT monitors the internet providing historical data since 1979 for all broadcast, print and web news from nearly every country in over 100 languages and identifies people, locations, organizations, counts, themes, sources, emotions, quotes, images and events. For more information go to

The SSE Composite Index is a capitalization-weighted index which tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Indices are unmanaged and cannot be invested in directly.


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2019-09-17T09:16:37+00:00 By |