3rd June 2014 Chinese Economic Update

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3rd June 2014 Chinese Economic Update

The world's second largest economy is currently under question and as we enter the 3rd quarter of 2014 we are starting to see economic data that may be disputing whether the Chinese economy is in fact performing worse than predicted.

Here we look at the most recent economic indicators seen from the region and what is coming in the next few weeks.

This weekend saw the Manufacturing PMI expand its fastest in five months. With a figure of 50.8 for May this was seen as a good indicator that manufacturing and specifically large scale industry was getting back up to speed after the holiday period seen earlier in the year. The Chinese New Year celebrations were largely put to blame for the poor data out of China at the beginning of the year and since then we have seen repeatedly positive figures from the economy. Yesterday saw the Services Sector data and this again did not disappoint. The non Manufacturing PMI data for April was a reasonable 54.8 and May saw a generous increase to 55.5. This was mainly helped by New Orders data which was the fastest paced for eight months. New Orders came in at 52.7 for May against a 50.8 for April proving that exports were soon to be back to pre 2014 levels. One set of data which was specifically appreciated was the Business Expectations figure. Breaking 60 on the scale broke all analysts expectations and no doubt pleased the local government.

The Central Bank in China has been attempting to stimulate the country's economy since the beginning of the year and with new rulings easing up mortgage payouts and a reduction in the amount banks need to hold in reserve, this has been seen as a positive step in the right direction. Also, with its extended tax incentive for SME's and a commitment to expanding the rail infrastructure the local economy is poised to get back to its powerhouse status.

Next week see's a slew of economic indicators which will be eagerly awaited. Starting with Import and Export data early next week the numbers come thick and fast most notably, Balance of Trade and key Inflation data will round off the week amidst a whole host of manufacturing and productivity data.

One important factor will be how local disputes in the South China Sea will pan out. The US have been quite active in the region, recently signing new trade agreements with several South East Asian countries currently having issues with China and their territorial claims. Although not particularly far reaching, should China become more aggressive and we start to see similar situations as with Russia and the Ukraine, it would be improbable to think that there would not be some form of retribution form the west and as China's exports to the West are hugely beneficial for the country it will be interesting to see whether they will be as heavy handed as their Russian counterparts.

Major Indexes as of 3rd June:

Index          % Change          Close/Current

DOW Jones         (+0.16%)          16,743.63

NASDAQ          (-0.25%)          4,237.20

FTSE 100          (+0.29%)          6,864.10

CAC 40          (-0.08%)          4,515.89

DAX          (+0.07%)          9,950.12

Nikkei 225          (+0.66%)          15,034.25

Hang Seng          (+0.59%)          23,218.69

SSE          (+0.15%)          2,042.74

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