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ChartBrief #9 China Business Surveys

September 23, 2016

While China no longer has a flash manufacturing PMI (like Japan/US/Eurozone) what it does have is the MNI China Business Sentiment Survey, which was just released today for September.  The index was up +1.5pts to 55.8 (a 13 month high). The driver of the increase in the index was a solid rise in new orders and inventories. The latest result continues its improving path from the lows in February.

The improvement in the MNI indicator tends to line up with the more mild improvement in the official PMIs (note the chart above shows a 3 month average for the MNI and a 3 month avg of the NBS/official manufacturing + non-manufacturing PMIs).  MNI economist Andy Wu said: The latest MNI China Business survey saw headline sentiment rise to a thirteen-month high suggesting that the Chinese economy will likely end Q3 on a fairly strong note, with growth holding up in both manufacturing and services. While the outlook remains challenging, our forward-looking activity indicators suggest that growth momentum is likely to continue into the final quarter of the year, supported by a continuation of policy easing.”

 

Of course if you follow Topdown Charts, you would already know that China has induced a cyclical rebound in its economy by way of a coordinated monetary and fiscal policy stimulus program second only to the 2009 global financial crisis response, as the chart below shows (policy rate vs fiscal deficit).

If you read the piece "8 Charts on China's Stimulus Driven Rebound" you probably would be recalling at this stage that the cyclical rebound will be limited in duration and magnitude due to the structural headwinds. Again, this is a classic case of using cyclical policy tools to address structural challenges (with a dash of cyclical headwinds) - which is something that has been repeated the world over (Europe, Japan, USA). But that doesn't mean its not tradeable, the rebound in producer prices remains a positive dynamic for emerging markets, and as for broader risk sentiment the relatively benign economic patch that China is currently in will remove the "China risk" for now...

 

Bottom line: China's stimulus induced cyclical rebound remains in play.

 

 

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