China: SME financing becoming a concern – Standard Chartered

Lan Shen, Economist at Standard Chartered, suggests that their China SME survey shows a moderation in SME activity in July on deteriorating credit conditions.

Key Quotes

“The headline SMEI (Bloomberg: SCCNSMEI ) edged down to 55.7 from 56.0 in June as the growth momentum index weakened to 8.9 from 10.7.”

“Growth was largely dragged down by the ‘credit’ sub-index, which slid 1.3ppt to a record low of 50.4, while the ‘current performance’ and ‘expectation’ sub-indices were steady.”

“Manufacturing SMEs outperformed services SMEs, while export-oriented SMEs appear to have avoided a fallout from US-China trade disputes for now.”

“Real activity showed signs of stagnation in July as sales continued to moderate and production activity expanded at a slower pace.”

“Self-imposed policy tightening likely led to a gradual cooling down of domestic demand, while exports performed fairly well.”

“Going forward, the government’s pledge to support domestic demand could help curb downside risks, and decent corporate profitability and the restocking process should underpin production activity.”

“SMEs’ financing conditions have worsened, with credit access becoming more difficult and funding costs being high. This adds to the case for more targeted easing, in our view.”