A look at the performance in the individual sub-components of the index reveals negative surprise potential for economic development in the months ahead: the “new orders” sub-index is heading down, whereas the sub-index “stocks of finished goods” is pointing up. Given shrinking order books, numerous Chinese companies are evidently producing for stocks.
Together with other economic data in recent weeks, such as industrial production and retail sales, this paints a picture of a fragile economic upswing. The domestic economy is losing steam and at the same time the global economic environment remains difficult forChina, which in turn is reflected in the performance of foreign trade.
Against this backdrop we have trimmed our forecast for economic growth this year from 8.3% to 7.8%. But we are not expecting a hard landing. Although the Chinese government only recently stressed that it was not prepared to stoke the economy with new stimulus packages, we believe that, should a sharp slump loom, the Chinese government would in this event launch corresponding countermeasures. It still possesses the necessary fiscal firepower.