Slowdown In Full Effect
BMI View: Recent data from China, including another disappointing PMI figure, reflect a rapidly slowing economy. While the People's Bank of China (PBoC)'s recent liberalisation of the yuan is an attempt to boost the competitiveness of Chinese exports, the balance of the government's other economic reform initiatives will in our opinion be growth-negative, and we therefore maintain our below consensus real GDP growth forecast of 7.1% for 2014.
China's HSBC/Markit Flash Purchasing Managers' Index (PMI) has disappointed to the downside once again, posting at 48.1 versus consensus expectations of 48.7. The result puts the metric solidly in contractionary territory for the third straight month, and adds to the list of indicators corroborating our expectations for a significant slowdown in the broader economy. February data also showed a rapid deceleration in fixed asset investment, which fell to its slowest rate of expansion (17.9% year-on-year [y-o-y]) in nearly 13 years. Meanwhile, February exports witnessed a massive retrenchment, with externally-bound shipments falling by 18.1% y-o-y in the category's worst showing since August 2008.
Data Painting A Bleak Picture
|Further Into The Contractionary Depths|
|China - HSBC/Markit Flash PMI|