The PBOC seems to have decided The PBOC now has a more pressing problem : the latest data show lacklustre economic momentum in July and a slowdown in credit growth, which has been less responsive to policy easing than during previous economic downturns.

Julian Evans-Pritchard

With global growth likely to cool further in the coming quarters and United States tariffs set to become more punishing, the recent resilience of exports is unlikely to be sustained.

Julian Evans-Pritchard

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The two PMIs taken together still point to subdued activity in th... by Julian Evans-Pritchard

The two PMIs taken together still point to subdued activity in the manufacturing sector.

Julian Evans-Pritchard

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The current weakness in loan demand is partly structural, reflecting a loss of confidence in the housing market and the uncertainty caused by recurrent disruptions from China's zero Covid strategy, these are drags that can't be easily solved by monetary policy.

Julian Evans-Pritchard

The July data suggest that the post-lockdown recovery lost steam as the one-off boost from reopening fizzled out and mortgage boycotts triggered a renewed deterioration in the property sector.

Julian Evans-Pritchard

The PMIs probably understate the hit to activity last month, the services index remained above the low of 45.2 that it hit last August during the Delta wave. That's probably because the survey was conducted prior to the worst disruptions.

Julian Evans-Pritchard

This suggests that the economy is contracting at its fastest pace since the height of the initial Covid-19 outbreak in February 2020.

Julian Evans-Pritchard

With a couple of exceptions, most major developers are in a much stronger financial position than Evergrande and should be able to weather a temporary spike in their borrowing costs amid contagion fears.

Julian Evans-Pritchard

Demand for newly built urban housing is now entering an era of protracted structural decline.

Julian Evans-Pritchard

We doubt producer price inflation will rise much further.

Julian Evans-Pritchard

Even if other developers avoid a similar fate, construction activity is likely to suffer as they are forced to pare back new projects.

Julian Evans-Pritchard

The latest surveys suggest that China’s economy contracted (in August) as virus disruptions weighed heavily on services activity. Industry also continued to come off the boil as supply chain bottlenecks worsened and demand softened.

Julian Evans-Pritchard

We think trade will remain resilient in the near-term but will soften later this year.

Julian Evans-Pritchard

While it won't derail China's economic recovery overnight, it will gradually weaken the recent tailwinds from policy stimulus.

Julian Evans-Pritchard

It's certainly not going to be a return to normal next week, the longer this disruption continues the higher the risk it affects employment and the higher the risk of a much bigger hit on the economy.

Julian Evans-Pritchard