We developed a machine learning algorithm to “read” China’s official newspaper — the People’s Daily — and predict its policy changes using only the information in that newspaper. The output of this algorithm, the Policy Change Index (PCI) for China, is a leading indicator of the actual policy changes in China since 1951. The nearby figure plots the PCI against the ground truth of China’s policy changes. The PCI often spikes months before policy changes take place, validating the index’s predictive power.

“Reading China: Predicting Policy Change with Machine Learning”

 

Policy Change Index and major events in China, 1951 Q1 to 2018 Q3

A spike in the PCI signals a policy change, while a vertical bar marks the occurrence of a policy change labeled by the event.

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