China SMEI: Weaker outlook despite better current performance – Standard Chartered

Lan Shen, economist at Standard Chartered, points out that China’s December SMEI reading confirmed a deceleration in real activity in Q4-2018.

Key Quotes

“The headline SMEI (Bloomberg: SCCNSMEI )  –  based on our monthly survey of more than 500 SMEs  –  stayed flat at a weak 54.7 in December. Despite an uptick in the ‘current performance’ sub-index reading, the ‘expectations’ reading weakened and fell below the ‘current performance’ reading, suggest downward pressure in the next quarter continued to mount. The ‘credit conditions’ sub-index also retreated after a brief improvement, calling for stronger policy support.”

“Export demand weakened while domestic  demand remained sluggish for SMEs in December. Acceleration in production was driven mainly by the non-manufacturing and hi-tech industries, while the manufacturing industry slowed further.”

“Credit conditions improved marginally in Q4, but difficult credit access and high borrowing costs remained issues for most SMEs, according to our December survey.”