China PMI Shows Economy Is Slowing Broadly: BNP Paribas

The PMI numbers out on the weekend your your initial take on what happened. Well, I think it shows that the economy is slowing broadly because not just the, the, the, the manufacturing PMI is below 50 again, but also the service PMI and construction PMI also softened notably. I think all this if take a look at the composite PMI performance in second quarter. I think it's consistent can do with our view that after a very start strong start in Q1 this year in terms of sequential GDP growth, we think it has slowed down notably from 1.6% in Q1 to probably stop 1% in second quarter. Hey, Jacqueline, Steve Engel here. I thought manufacturing was supposed to be the strong point of the economy right now with the consumer so weak obviously and also the property market woes. But it doesn't look good now, 49.5 second straight month and actually 12 out of the last 15 months the manufacturing official PMI has been below 50. So, you know, looking forward to policy in a couple of weeks with the third plenum. What needs to be done? I know that's a longer term planning meeting, but again, they need some immediate help. Well, you're right. I think the certain plenum is all about the party spelling out the medium long term structure reform program. And now it seems at least the four items would be on the agenda, including how to strengthen the party's leadership over the economy and the financial system and how to build a unified and national market and and how to develop the so court and view our quality productive force. And probably a series of fiscal and tax reform. I think this policy reform is going to probably help to shape the economy in the next 5 to 10 years, but it's still not going to provide an imminent boost to short term economic growth. For short term counter cyclical measures, probably we need to eye for the the political Bureau economic meeting which is usually held in late July and your expectations ahead of that specific the Politburo meeting? Well, I would expected the Political Bureau meeting to map out another a series of easing measures including both fiscal and monetary for fiscal policy, I think so for this year the eastern pays of government bond has been very, very tardy in the first five months only 30% of this year's quota has been utilized. So I think pretty much for the third quarter the the instruction from the party might be local government and central government should continue to speak up the eastern pace of this government bond and as well as the corresponding a disbursement of the money and some money to reside. We do expect that sometime in the third quarter that the PBOC may cut policy rate and RR again to have fed and reduced the debt servicing burden of the real economy and to also inject a little bit more liquidity to the banking system to cope with a step up in government bond issuance. At the same time, probably a little bit more policy easing, especially in Kier one cities where there are still some form of purchase restrictions. Well, Jacqueline, what needs to be done if anything to boost the consumer sentiment? I mean some of these buy in program, our trade in programs for appliances and the like haven't really taken off. I didn't think it was necessarily going to be a Big Bang move anyway. What needs to be done to improve that confidence and get the consumer spending again? Well, I think first of all, consumer income is actually sort of a lagging indicator of overall economic growth. So if was all this structure say economic reform map out at a certain as well as additional policy easing coming out of the Political Bureau economic meeting, If that can help to #1 actually boost the market sentiment boasts for a business as well As for the household and secondly to really stabilize economic growth, then I think that will pave the way for us to see a grandeur stabilization in consumer confidence. Other than that, well, if we are going to see a substantial boost to that, I think probably more transfer payment from the government, either in the form of consumption voucher or a cut in personal income tax probably were helped to boost the consumer sentiment as well.