China Services to Manufacturing Suggest Slowdown Easing
Comment of the Day

August 05 2013

Commentary by David Fuller

China Services to Manufacturing Suggest Slowdown Easing

Here is the opening to this informative article from Bloomberg
China's economy is showing signs of stabilizing after slowing for two straight quarters, with official manufacturing and services indexes rising and gains in gauges of business expectations.

The non-manufacturing Purchasing Managers' Index rose to 54.1 in July from 53.9, the first acceleration since March, government data showed Aug. 3, following last week's unexpected gain in a manufacturing PMI. Readings above 50 indicate expansion. A services index from HSBC Holdings Plc and Markit Economics was unchanged at 51.3, a separate report showed today.

The reports may bolster confidence that Premier Li Keqiang's policies are helping prevent a deeper slowdown in growth, allowing him to pursue reforms that will secure more sustainable longer-term expansion. The country's economic-planning agency said yesterday the construction of transportation-related infrastructure projects will be accelerated, adding to efforts to boost domestic demand that have included tax-system changes and help for small companies.

"The PMI is supposed to be a leading indicator so we are witnessing a stabilization and a sign the economy isn't slowing down at a faster rate," said Steve Wang, Hong Kong-based chief China economist with Reorient Financial Markets Ltd. "A lot of economy-boosting measures have been put in place since the beginning of the year and there's a time lag for those to kick in, so we should see a bit of a rebound in the fourth quarter."

David Fuller's view This is encouraging news at a time when investors, including those within China, have been wary of the SHASHR Index (weekly & daily). The probability is that we saw an important low in late June, and a push back above 2200 would indicate further recovery scope for what remains one of the most oversold stock markets. Meanwhile, the Hong Kong Hang Seng Index (weekly & daily) remains considerably stronger.

Here is a recent short interview with Mark Mobius on China.

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