China: SME sentiment softened further in July – Standard Chartered

Standard Chartered analysts note that their latest SME survey of Chinese economy shows moderately weaker sentiment in July.

Key Quotes

“The headline SMEI (Bloomberg: SCCNSMEI <index>) – based on our monthly survey of more than 500 SMEs nationwide in China – edged down to 53.8 in July from 54.0 in June, with the growth momentum indicator (new orders minus finished-goods inventory) continuing to moderate. Both the ‘current performance’ and the ‘expectations’ sub-indices retreated, while performance of export-oriented SMEs eased in July.”

“Overall demand remained subdued, despite an unexpected surge in export orders. This took a toll on SMEs’ production activity. The labour market showed signs of weakness on slowing production.”

“Given the weak performance and outlook, we expect more counter-cyclical policies in the near future and the lagged effect of both expansionary fiscal policy and accommodative credit policy to help turn around growth momentum in H2.”

“SMEs’ credit conditions improved in July, with the ‘credit’ sub-index edging up to 51.6 from 50.9 in June, driven mainly by better bank credit access for SMEs. However, banks’ lending rates for SMEs climbed further in July, pressing for moves to lower real lending rates for SMEs.”