Chinese Analysts See Economic Momentum Easing in the Second Half


Following the release of purchasing managers’ index reading for July, some of China’s leading analysts see demand growth slowing and economic momentum easing in the second half of 2017.

While both the official and Caixin manufacturing sector PMI figures for July are above the 50 point threshold, leading Chinese analysts see the potential for slightly weaker growth across the rest of the year based on official government data.

The Caixin PMI saw an increase of 0.7 percentage points compared to the preceding month to hit a four month high of 51.1 , as well as strong improvements in both new orders and production figures.

The official PMI index released by the government pointed to a 0.3 percentage point decline, however, 51.4, which is below the first-half average.

The official manufacturing index and new orders index also saw falls of 0.9 and 0.3 percentage points respectively, to 53.8 and 52.8.

Speaking to Caixin Bank of Communications chief economist Lian Ping said that the decline in new orders clearly indicates that growth in manufacturing sector demand is easing and could become weaker, yet still continue the higher than the 52 point level which points to comparatively strong growth.

The official export orders index saw a larger slump, pointing to the potential for second half export growth to lag behind that of the first half, yet Lian still expects full year exports to post an improvement compared to the past two years.

Morgan Stanley Huaxin Securities chief economist Zhang Jun said that in the first half China’s economy managed to beat consensus forecasts on the back of stable domestic demand and improvements in external demand, yet it remains to be seen whether these growth drivers will remain strong in the second half.

End demand is already showing signs of weakening, and it remains to been whether industrial manufacturing has already reached a turning point, given the strong impact of climate factors on data for July.

Zhang further notes that the delayed impacts of the Chinese government’s financial deleveraging drive and property sector controls will become more apparent in the second half, leading to a further slump in real estate investment growth, and leaving little likelihood of growth in infrastructure investment beyond forecasts.