In a miracle of modern goal-seeking, China's Manufacturing PMI clung to within an inch of 'stable' 50 level for the 20th month (actually missing expectations of 50.0, printing 49.9) But while manufacturing is its lowest since Feb, the non-manufacturing PMI jumped to 53.9 – its highest since Dec 15. Following the notable USD weakness on Friday (thanks to BoJ disappointment), and the apparent recovery of the Chinese economy (just need another trillion or two of credit to keep the dream alive), PBOC strengthened the Yuan fix by 0.35% – the most since mid-June… extending the 9-day gain to the most since Sept 2010.
Manufacturing slipped to a 5-month low…
Services hits 7-month (2016) highs…
Evercore ISI notes the following a China's most crucial recent developments…
- “Severe challenges” in the China economy says Beijing, worse than “persistent downward pressure” – their characterization of the last several months.
- Two components to this change. One, managing expectations down. Two, showing the upcoming G20 (Sep 4-5) attendees that the officials are on the case.
- Conflicting Beijing comments. Saying ‘foundation of stable economic development not solid’ – bad. Then saying the ‘long-term positive trend in fundamentals has not changed’ – good.
- China budget deficit now 4.2% of GDP, vs. 2.2% in worst of 2008-09 global crisis amid a big stimulus program. More stimulus coming.
- CBRC (banking authority) tightening regulations to contain growing risks from sketchy practices in the ‘Wealth Mgmt Products’ arena. NPL fears also.
- Media control even tighter by Beijing. All original ‘current affairs news’ is now banned by internet portals. Managing what people see – not the path of modern market economies.
- Yuan strengthened this last week, mostly on Friday. Think of this as more USD weakness than Yuan strength.
And that Yuan strength continues as PBOC fixes the currency stronger by the most since mid June…
- *CHINA STRENGTHENS YUAN FIXING BY 0.35%, MOST SINCE JUNE 23
This is the 8th Yuan strengthening in 9 days… the biggest strengthening since Sept 2010…
Is this the post G-20 agreement? Fed promises not rose rates, China allows Yuan to rise.. world remains stable into the election to try to ensure HRC wins?
Charts: Bloomberg
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