To figure out how far President Xi Jinping will go to revive his struggling economy, a growing number of money managers are taking cues from a once-jailed Chinese dissident now living in Canada.
From a basement in Calgary, often accompanied by his pet cat, Lu Yuyu spends 10 hours a day scouring the internet to compile stats on social instability before they are scrubbed by China’s censors. The 47-year-old exile won’t reveal his exact method because it risks jeopardizing the overall goal of the project called “Yesterday,” which documents cases of group protests.
“These records provide an important basis for people to understand the truth of this period of history,” said Lu, who started the effort in January 2023 but didn't make it public until he arrived in Canada a year ago. “I didn’t want to go to jail again,” he explained.
While Lu’s interests are political, his database — available for free — is among a growing number of metrics tracking dissent in China that investors are watching to figure out when Xi will open up the spigots to bolster growth. And some banks are now starting to develop similar products.
Morgan Stanley in September debuted a new gauge of distress that could be used to predict policy swings in China. Robin Xing, the bank’s chief China economist, says it’s nearing the low levels reached two other times in the past decade: in 2015, when Beijing took drastic steps to arrest a $7 trillion stock market rout, and in 2022 — the point at which the Communist Party abruptly dropped its strict Covid controls after simultaneous street protests in major cities.
A “whatever it takes” moment could be triggered by a rapid decline in the bank’s social dynamics indicator, Morgan Stanley economists wrote last month after Beijing announced a blitz of supportive measures. It expects China to unleash 2 trillion yuan ($371.11 billion) in fiscal support this year and add up to 3 trillion yuan more in 2025. That would be well short of the 10 trillion yuan the bank estimates is needed over two years to fend off deflation — with the extent of easing likely to be dictated by risks to social order.
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“We are quite close to a threshold level,” Xing said. Still, as conditions haven’t declined to the levels seen during the pandemic lockdowns or 2015, he said Beijing may still take a more gradual approach to major structural reforms like shoring up housing and social welfare despite its faster-than-expected pivot.
While China’s opaque political system makes it difficult to attribute policy moves to any single factor, investors and analysts who track instances of unrest say authorities may be especially sensitive to them when deciding on whether to roll out stimulus and how much to deploy. Economic protests have become more frequent in recent years as China’s youth unemployment rate soared and its housing crisis worsened.
With the precise contours of China’s fiscal plans expected to take shape in early November at the next meeting of the Standing Committee of the National People’s Congress, China’s legislature, the market remains split over the odds of a bigger stimulus. A historic rally in Chinese stocks has meanwhile pared some of those gains as the wait drags on.
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Investors who spoke with Bloomberg made clear they’ve been looking much more closely at metrics on social pressure since earlier this year by tracking findings from groups such as US-based Freedom House’s China Dissent Monitor, which began incorporating researcher Lu’s data in June this year.
The index devised by Morgan Stanley tries to distil patterns by parsing data from China’s central bank, the National Bureau of Statistics and Hong Kong-based advocacy group China Labor Bulletin. The idea is to create a composite score using data such as wage growth, job sentiment and labour protests to gauge the social impact of economic performance and tease out correlations with real-world policy tipping points.
Collecting information on unrest in China is notoriously difficult. For Lu, who fled to Canada about a year ago, it’s a mission that’s already landed him with a four-year sentence for “picking quarrels and provoking trouble” – a charge that ended an earlier effort to document unrest.
Even keeping tabs on protest trackers can land you in trouble. Earlier this year, "Teacher Li," a prominent overseas protest watcher with more than 1.7 million followers on X, said that police had approached some of his followers for questioning.
Getting a read on what’s happening on the ground is a challenge for academic researchers and finance professionals alike. Widespread censorship, heavy surveillance and suppression of dissent have made it hard to assess the depth of economic malaise in the country of 1.4 billion people.
`Cat-and-mouse game’
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Since China stopped publicly disclosing its statistics on “mass incidents” in 2008, there’s no longer any centralised database. In recent years, as the government has increasingly removed both official and private data from public access, reliable information about the economy has become difficult to obtain.
The rising prominence of dissent metrics is part of a blossoming industry of so-called alternative data aimed at decoding the state of the world’s second-biggest economy. The pandemic spurred a fresh wave of demand when the market tried to make sense of what was happening by using everything from daily readings of traffic congestion to satellite images of activity around shopping malls.
Kevin Slaten, a Taiwan-based researcher who leads China Dissent Monitor, said drawing from diverse sources is key to better capture the actual dissent that’s taking place. His project’s research prioritizes documenting in-person protests.
With authorities sometimes scrubbing critical videos and social media posts in a matter of minutes, and the topics deemed necessary to control constantly in flux, capturing this data is often down to a race to beat the censors.
“Censorship is a cat-and-mouse game,” Slaten said.
China Dissent Monitor sources include news reports, civil society organizations and mainland-based social media, including the application of a machine-learning algorithm. Like Lu, though, Slaten won’t share specific details of his research methods for fear of alerting the authorities to his techniques.
Artificial intelligence has helped speed up the process of documenting dissent before it’s lost, filtering hundreds of thousands of posts down to the several hundred with a high probability. But it still often fails at the final step.
“Humans are so good at understanding innuendo and connotation, and algorithms are not,” said Slaten. While it’s easy for people to identify the visual traits of unfinished building projects or unpaid construction workers, that would be near impossible for a machine.
For analysts and investors fixated on when Beijing’s patience may snap, evidence is piling up that a turning point may not be far off. Morgan Stanley’s social dynamics gauge has worsened since earlier this year, with its employment-related indicators reaching the lowest levels ever.
Economic protests meanwhile are on the rise, according to China Dissent Monitor’s database, as anxieties deepen more broadly across the country.
Three-quarters of all the protest events documented by the project involve financial claims centred around issues like workers demanding unpaid wages, homebuyers protesting undelivered apartments, retirees demanding benefits and rural residents with confiscated land.
Life has become tougher for many in recent years as pandemic lockdowns, a real estate crisis and trade tensions have slowed growth in China.
Incomes are still rising, but gains under Xi have been the weakest since the late 1980s. Faith in the country’s meritocracy also appears to be waning, leaving white-collar workers feeling increasingly disillusioned. Companies mired in fierce price wars are laying off employers, while college graduates are struggling to find work.
China Dissent Monitor’s data shows that cases of dissent rose 18% in the second quarter compared to same period last year, with the majority of events linked to financial issues.
‘It’s deteriorating’
“If you look at everything regarding social well-being — be it wage growth, urban unemployment rate, consumer confidence and even tracking labour incidents — I think it’s deteriorating,” Morgan Stanley’s Xing said.
Although protests aren’t particularly rare in China, they’re typically small scale, uncoordinated with other places and lacking in overt criticism of Beijing. Still, political criticism can bubble up, usually in cases linked to rural land actions where the local governments find themselves the target of discontent, according to China Dissent Monitor research.
Earlier this year, in the lush mountainous southwestern province of Yunnan, villagers occupied a construction site for a month to protest a resettlement plan. When police came to disperse the crowds and their barricades, protesters shouted slogans: “The government is beating people up” and “Xi Jinping’s gang is beating people up.”
Though direct criticism of the Chinese leader is rare, the case – initially discovered and recorded as part of Lu’s “Yesterday” project — underscores how dissatisfaction over land seizures can threaten regime legitimacy. That might explain why more than half of cases linked to such disputes result in repression as local officials fear greater political risks, according to a recent China Dissent Monitor report.
Even so, there are few signs that the unrest is coalescing around a particular instance of perceived injustice or a single issue. Unlike the Tiananmen Square protests and unrest in the late 1980s, current dissent doesn’t present an existential threat to the regime. A more likely response is therefore a dose of economic medicine that will keep the market guessing.
“Social stability is the top priority of the leadership,” said Liqian Ren, director of Modern Alpha at WisdomTree Inc., a New York-based asset management firm.
“Growing evidence suggests that meeting this year’s ambitious 5% growth target — despite potential data manipulation — has become increasingly challenging,” she said. “These combined pressures likely played a significant role in prompting action.”
