增长疲软需要额外的政策支持

Bingnan YE, Ph.D(852) 3761 8967yebingnan@cmbi.com.hk China’seconomic activities softened in Apr as PMIs in both manufacturing andservicedeclined.Demand weakened as businesses continued to reduceinventory. Deflation pressure mildly alleviated as purchasing material pricesrebounded amid a pick-up in commodities prices.Employment remained subduedasconsumer confidence was still weak.The economy still faced severechallengesas property market continued to slump and deflation pressureremained.The politburo vowed to step up support to economy at therecentmeeting as top leadersindicated to deal withexcessivehousing inventoriesandflexibly use interest rates and RRR to boost the demand.Policymakers mayfurther lift home purchase restrictions in higher-tier cities with targeted cuts inmortgage rates and down-payment ratios especially for first-home and second-homebuyers.Meanwhile,local governments may be encouraged to buycommercial houses and turn them into affordable houses to reduce excessiveinventories in the market. In addition, the policymakers may provide moderatefiscal subsidies to business equipment upgrade and consumer trade-in programs.We expect China’s economy may gradually improve in 2024 thanks to lesspropertyshrinkage,moderate recovery of consumption and noticeableimprovement of exports. We maintain our forecast on China’s GDP growth at4.8% for 2024. Frank Liu(852) 3761 8957frankliu@cmbi.com.hk Manufacturing activities continued to expand but moderated.China’smanufacturingPMI in Apr slowed down to 50.4%from 50.8%in Mar.Production indexfurther expandedto52.9% from52.2%, the highest levelsince Mar 2023.Demand softened as neworder and export order indexmoderatedto 51.1% and 50.6% from53% and 51.3% whileexisting orderdeclinedto 45.6%.Corporate procurement remained in expansion butdecelerated as materialpurchase volumedipped to 50.5%.Manufacturerscontinued to reduce inventory as raw materials inventory remained flat at48.1% whilefinished goods inventoryedged down to47.3% from48.9%inMar.Breaking down by sector,business sentimentindexesinrubber & plasticproducts,transportation equipment other than vehicle and computer&electronic equipmentreached above 55% in high prosperity interval. Source:NBS, CMBIGM Deflationarypressureeased due to rising prices forraw materials.Ex-factoryprice indexroseto 49.1% in Apr from47.4%, while manufacturingmaterial purchase priceincreased to 54% from50.5%amidrecentrally ofcommodities price.Ex-factory pricemay continue to rebound as PPI may seepositive MoM growth inupcoming months. Service price index stayed incontraction butincreased to 49.5%, while construction price edged up to48.7% from48.4%.Looking forward,China’s CPI may stay within the lowerpositive rangewhile PPI gradually narrow itsYoYdecline due to base effect,surging commodities priceandimproving export activities. Service index missed while construction remained robust.Non-manufacturing PMIdropped to 51.2% in Apr from53%, lower than marketexpectation.PMI in servicenotablydeclined to 50.3% in Apr from 52.4%. Neworder indexmoderated to 46.5% from 47.2%.Breaking down by sector,activitiesinrail transport, road transport,postal services and TV & broadcastreached above 55% while realestate and capital market servicescontinued tocontract.Construction PMI remained in strong expansion at 56.3%,asconstruction activitiescontinued toresume. Business sentiment indexes inconstruction and services bothslightlymoderated. Employment remained subdued.Employment indexes in manufacturinginched down to 48% from48.1%while employment inservice andconstructionbothimprovedfrom46.8% and 45.7%to 47.4% and 46.1%, althoughtheyremained in contraction.The employment condition showed no signs ofalleviation as recent momentum in manufacturing required less labor intensitydue to technology upgrade and advancement. April PMI showed a mixed imageasthe politburo vowed to step upsupport for economy.PMI pointsto a continuedmomentum in manufacturingactivities with improving demand and relieving deflation pressurewhile servicesectorhasslowed down ahead of laborday holidays.The economystill facedsevere challenges as property marketcontinued to slump and deflationpressure remained. The politburo held a meetingon Tuesday(30 Apr)andvowed to step up support for economy ahead. Top leaders said to increasesupport to property sector with a focus on dealing with housing inventories.The politburo also said to flexibly use policy tools such as interest rates andRRR to reduce the overall cost of social financing.Policymakers may furtherlifthome purchase restrictions in higher-tier cities with targeted cuts inmortgage rates and down-payment ratios especially for first-home and second-home buyers. To protect banks’ NIMs, the central bank may guide banks tofurther reduce deposit rates before possible mortgage rate cuts.Meanwhile,local governments may be encouraged to buy commercial houses and turnthem into affordable houses to reduce excessive inventories in the mar