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China SMEI: Weaker outlook despite better current performance – Standard Chartered

Lan Shen, economist at Standard Chartered, points out that China’s December SMEI reading confirmed a deceleration in real activity in Q4-2018.

Key Quotes

“The headline SMEI (Bloomberg: SCCNSMEI <Index>) – based on our monthly survey of more than 500 SMEs – stayed flat at a weak 54.7 in December. Despite an uptick in the ‘current performance’ sub-index reading, the ‘expectations’ reading weakened and fell below the ‘current performance’ reading, suggest downward pressure in the next quarter continued to mount. The ‘credit conditions’ sub-index also retreated after a brief improvement, calling for stronger policy support.”

“Export demand weakened while domestic demand remained sluggish for SMEs in December. Acceleration in production was driven mainly by the non-manufacturing and hi-tech industries, while the manufacturing industry slowed further.”

“Credit conditions improved marginally in Q4, but difficult credit access and high borrowing costs remained issues for most SMEs, according to our December survey.”

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