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Standard Chartered analysts note that the China’s official manufacturing PMI moderated to 50.1 in April from 50.5 in March and while the result undershot the market consensus, it stayed above 50 (signifying expansion) for a second consecutive month.

Key Quotes

“The production sub-index declined 0.6ppt to 52.1, indicating that real activity may have normalised from the post-holiday rebound and VAT-related distortion. The new orders sub-index declined slightly, with new export orders improving and domestic demand softening. The non-manufacturing PMI fell to 54.3 from 54.8 in March, pulled lower by construction activity.”

“We expect industrial production (IP), fixed asset investment (FAI) and retail sales growth to have eased in April, but to have remained stable compared to Q1. Export growth likely retreated after a seasonal jump in March, while the import contraction may have eased. FX reserves likely declined after five straight months of increases on unfavourable FX valuation effects. Interim data suggests that CPI and PPI inflation may have edged up further.”

“We expect M2 growth to have slowed, mainly due to tax collection. At the Q1 monetary policy committee (MPC) meeting on 12 April, officials reiterated that M2 and total social financing (TSF) growth should be in line with nominal GDP growth.”