Ping An Digital Economic Research Center (DERC)

Ping An - DERC

Ping An Digital Economic Research Center (DERC) utilizes more than 50 TB of high frequency data points, more than 30 years of historical data and more than 1.5 billion data points to drive research on the “AI + Macro Forecast” and provide insights and methods towards precise macroeconomic trends. 

Ping An DERC is a research center for Ping An Insurance (Group) Company of China, Ltd. (“Ping An”) is a world-leading technology-powered retail financial services group. With over 204 million retail customers and 534 million internet users, Ping An is one of the largest financial services companies in the world.

Ping An Digital Economic Research Center

Zheng Zeng

FX & Rates

<div>This report aims to resolve problems in forecasting long-term interest rates in China.</div>
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<strong>Traditional convergence theory cannot satisfy current forecasting requirements.</strong> The long-lasting downward trend of China's economic growth is well known, and the decline in growth is bound to cause a decline in rates of return. It must be noted that convergence theory can only provide insight into issues like “the continual declining trend of economic growth”.</div>
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<strong>Current demographic analysis makes it possible to forecast the long-term fluctuation trend of interest rates.</strong> Since there is already academic research on demographics and asset prices, based on this, we performed quantitative optimization by applying Grid Search. Data again confirmed the economic theory that the ratio of the population group aged between under 30 to over 40 is highly correlated with long-term trends in interest rates.</div>
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<strong>Demographic trends, together with wavelet analysis, can provide a more detailed dualcycle model to forecast long-term interest rates.</strong> Firstly, we employed the Hermite interpolation method to increase the population data frequency. Then, with the interest rate wavelet cycle, we came up with a model that could better fit the overall trend of interest rates. This dual cycle model could explain why these two interest rate cycles have been asymmetric since 2012: because China's long-term population structure has been rapidly flattening since 2012.</div>
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<div>Figure 17: Interest Rate Forecast After adding the Dual Cycle</div>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/579/original/image_99006239091600314108033.png?1600314111" class="editor-image img-responsive" data-smartkarma-image-id="159579"></figure>
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<div style="text-align: left;" class="content-caption">Source: OECD, Ping An DERC</div>
<div>Given the current data, the terminal interest rate is still trending downward, and the sharpest fall in rates of return will appear around Q2 next year.</div>
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This report aims to resolve problems in forecasting long-term interest rates in China.



Traditional convergence theory cannot satisfy current forecasting requirements. The long-lasting downward trend of China's economic growth is well known, and the decline in growth is bound to cause a decline in rates of return. It must be noted that convergence theory can only provide insight into issues like “the continual declining trend of economic growth”.




Current demographic analysis makes it possible to forecast the long-term fluctuation trend of interest rates. Since there is already academic research on demographics and asset prices, based on this, we performed quantitative optimization by applying Grid Search. Data again confirmed the economic theory that the ratio of the population group aged between under 30 to over 40 is highly correlated with long-term trends in interest rates.




Demographic trends, together with wavelet analysis, can provide a more detailed dualcycle model to forecast long-term interest rates. Firstly, we employed the Hermite interpolation method to increase the population data frequency. Then, with the interest rate wavelet cycle, we came up with a model that could better fit the overall trend of interest rates. This dual cycle model could explain why these two interest rate cycles have been asymmetric since 2012: because China's long-term population structure has been rapidly flattening since 2012.


Figure 17: Interest Rate Forecast After adding the Dual Cycle




Source: OECD, Ping An DERC
Given the current data, the terminal interest rate is still trending downward, and the sharpest fall in rates of return will appear around Q2 next year.


“Dual Cycle” Forecast Model Of Long-Term Interest Rates

China Treasury

“Dual Cycle” Forecast Model Of Long-Term Interest Rates