Source: Econoday |
Growth across developing economies has become a problem, and China is no exception.
Source: Markit/HSBC |
HSBC: - The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster destocking. This adds more pressure on the labour market. As Beijing has recently stressed to secure the minimum level of growth required to ensure stable employment, the flash PMI reinforces the need to introduce additional fine-tuning measures to stabilise growth.
The "fine-tuning" that HSBC is referring to is some type of
stimulus from Beijing. The PBoC however has trouble
introducing additional liquidity. The central bank views
such action as conducive to more shadow banking, which the
authorities have been trying to curb (see
post). Any significant "fine-tuning" is therefore
unlikely - in fact money market rates are no longer
declining (chart below). With exports remaining weak (see
post) and no central bank easing, growth is expected to
be anemic - at least by China standards.
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