IMF Working Papers

We study how Chinese macroeconomic surprises affect global financial markets. Exploiting forecast errors around key data releases and a 60-minute window around the release, we show that positive industrial production (IP) surprises lead to immediate increases in Chinese and Asia-Pacific stock returns, global long-term yields, and commodity prices highly demanded by China. A complementary identification strategy, which builds on different time zones, confirms positive spillovers to international equity markets, with stronger effects in countries more exposed to Chinese trade. Our results highlight the role of both Hedging Premia and Growth Expectations in driving asset price comovement. The findings highlight China’s growing influence in global markets and position it as a driver of the Global Financial Cycle.