Tuesday, August 2, 2016

More Targeted Stimulus Expected To Help Weakening Industrial Sector

Economic Research
          18 July 2016

Economic Highlights

China’s manufacturing PMI slid into contractionary zone again in July, the first since Mar 2016, showing China’s industrial sectors were still losing growth momentum. Looking ahead, industrial growth is likely to stay at low levels given drags from supply-side reform and potential headwinds in property market from late 2H16 onwards. Also, recovery of external demand will stay muted amid moderation of growth in advanced economies. On the policy front, pro-active fiscal policy could be the major tool for the government to cushion the economic slowdown. If manufacturing PMI stays below 50 for another couple of months, there will likely be more targeted stimulus packages, mainly on infrastructure projects, to be kicked off. But on the monetary policy side, the central bank is more likely to use low-profile monetary tools in the near term, rather than RRR cut or interest rate cut.

Economist:  Zhang Fan| +8621 6288 9611 ext 105

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