China: Manufacturing losing further momentum – ABN AMRO

Han de Jong, chief economist of ABN AMRO, points out that China’s business confidence in manufacturing, as measured by their various PMIs has weakened in December.

Key Quotes

“Both the national and the Caixin indicators fell below 50, suggesting a contraction of manufacturing. I am not sure how accurate that is, but it seems clear that the Chinese economy is slowing and probably more so than the authorities are willing to tolerate.”

“The Reserve Ratio for banks was lowered again by 1%-point, an effort to boost bank lending. We will see when the effects will kick in, but, as I have argued before, history suggests that the Chinese policymakers will continue to add measures until they have achieved their goals. Interestingly, the services sector PMIs were stronger in December. But as China is the manufacturing workshop of the world, the services sector PMIs are less relevant for judging the global business cycle.”