China released its official PMI over the weekend and it rose to 50.8 in May compared with the 50.7 median estimate. A solid improvement as the mini-stimulus and improving external demand work to boost production. More is expected, from Bloomie:
Nomura Holdings Inc. economists said measures including central bank loans for low-income housing are “starting to amount to something quite significant” as they scrapped their forecast for a second-quarter cut in banks’ reserve requirements. UBS AG said the government has gradually strengthened its mini-stimulus over the past couple of months and the central bank “has quietly eased liquidity conditions.”
The ruling Communist Party is trying to revive the economy without repeating the mistakes of its $586 billion stimulus begun in 2008, which caused a record buildup of debt and inflated property bubbles around the country. The State Council, or cabinet, said today it would lower reserve requirements for some qualified banks, after Premier Li Keqiang last week called on regional authorities to help stabilize expansion.
…Bigger moves may be in the offing. Nomura and Standard Chartered have forecast a nationwide reserve-ratio cut next quarter. Barclays Plc said in a note yesterday that chances are rising of more significant easing in coming weeks, such as “targeted” interest-rate or reserve-ratio reductions.
“There is increasing evidence that Premier Li Keqiang is probably more serious about the 7.5 percent growth target than hoped by those who have wanted the government to tolerate lower growth,” wrote Chang Jian, chief China economist at Barclays in Hong Kong.
Meh. The Government repeated the no more stimulus line late last week. I think we’ll see more targeted stuff and no big bang, at least until/if the property slide turns into a crash.
