China faces stuttering recovery – UOB

Ho Woei Chen, CFA, Economist at UOB Group, reviews the latest set of data releases in the Chinese economy.

Key Takeaways

“China’s official manufacturing and non-manufacturing PMIs eased further and were both weaker than expected in May. The disinflationary pressure has also increased with the output and selling prices falling.”

“Economic indicators since Apr suggested that China’s recovery is losing momentum. For now, we maintain our growth forecast for China at 5.6% in 2023 with 2Q23 at 7.8% y/y (1Q23: 4.5%).”

“Looking ahead, positive drivers include improvements in domestic services demand, stabilising property market and an expected upturn in global electronics demand while tightening global liquidity, increase in domestic Covid19 infections and geopolitical tensions are the key risks.”

“We also maintain our call for another cut to banks’ reserve requirement ratio (RRR) this year but see less chance of a resumption in interest rate cut while there is also expectation that the government will be rolling out incentives to boost high-end manufacturing.”