China China China

China Update: the busy economic calendar this week offers a glimpse of the state of the Chinese economy

Macro 7 minutes to read
Redmond Wong

Market Strategist, Greater China

Summary:  The Caixin Services PMI showed that the service sector in China was deep in the contractionary zone in May. Investors will be monitoring closely the trade data, aggregate financing and loan data scheduled to release this week for assessment of the direction of the Chinese economy.


China’s May Caixin Services PMI came this morning at 41.4, much weaker than expectation (Bloomberg consensus 46.0; April 36.2) and staying deeply in the contractionary zone and being the second lowest since March 2020.  Service employment sub-index fell further to 48.5 (vs 49.3 in April), the fifth consecutive monthly decline and the lowest level since March 2021. Companied surveyed cited pandemic control restrictions as an important factor for the weakness in activities. 

The improvement in May Caixin Services PMI number from April was notably weaker that what was suggested in the services sector sub-index of the official NBS non-manufacturing PMI that bounced to 47.1 in May from 40.0 in April.  In addition to the fact that the Caixin survey focusses on private enterprises, the differently might attribute to that difference in the timing of the survey.  The Caixin survey took place in mid-May when the COVID-related restrictions were more stringent than late May when the NBS survey was conducted. 

One bright spot in the Caixin Services PMI was the improvement in the output price sub-index which improved to 50.7, entering the expansionary zone, from 48.5 in April.  The input price sub-index decelerated slightly to 52.4 in May from 53.7 in April.  The improvement indicates some pricing power of business enterprises in the services sector to pass on cost increases to their customers. 

China has a busy economic calendar this week.  In addition to the Caixin services PMI mentioned above, the market will be focussing on the aggregate financing, loans and money supply figures that are expected to be released between June 9 and 15 (the exact date is not made known) and the trade data scheduled to release on Thursday June 9.

New aggregate financing is expected to rebound to RMB2 trillion in May (Bloomberg consensus) from RMB910bn in April, being help by an increase in government bond issuance and a rebound of new RMB loans to 1.2 trillion from last month’s 545 billion.  This implies the growth rate of outstanding aggregate financing remains subdue at 10.2% YoY, partly due to base effect.  May money supply is expected to grow 10% YoY (Bloomberg consensus) in May (vs 10.5% in April). 

May trade data is scheduled to release on Thursday June 9.  Container throughput data in the first 20 days of May suggests recovery in trade growth from the previous month as disruption to logistics and production eased.  Bloomberg consensus is calling for exports and imports to rise 8% YoY and 2.5% YoY respectively.

We will also have the inflation data scheduled to release on Friday June 10. Inflation is less a concern for policy makers or the focus of the market for the time being in China.  May PPI is expected to fall 6.5% YoY (Bloomberg consensus) from April’s 8.0% as energy and raw materials prices having plateaued and due to base effect.  May CPI is expected to inch higher to 2.2% (Bloomberg consensus) from April’s 2.1%.  During the month, China added to its state reserves of pork to stabilize and reverse the decline in pork price.  Pork has a weight of approximately 4.8% in China’s CPI. 

Caixin China Services PMI Business Activity Index; Sources: Bloomberg LP; Saxo
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.