Lan Shen, Economist at Standard Chartered, suggests that their China SME survey shows a moderation in SME activity in July on deteriorating credit conditions.

Key Quotes

“The headline SMEI (Bloomberg: SCCNSMEI <Index>) edged down to 55.7 from 56.0 in June as the growth momentum index weakened to 8.9 from 10.7.”

“Growth was largely dragged down by the ‘credit’ sub-index, which slid 1.3ppt to a record low of 50.4, while the ‘current performance’ and ‘expectation’ sub-indices were steady.”

“Manufacturing SMEs outperformed services SMEs, while export-oriented SMEs appear to have avoided a fallout from US-China trade disputes for now.”

“Real activity showed signs of stagnation in July as sales continued to moderate and production activity expanded at a slower pace.”

“Self-imposed policy tightening likely led to a gradual cooling down of domestic demand, while exports performed fairly well.”

“Going forward, the government’s pledge to support domestic demand could help curb downside risks, and decent corporate profitability and the restocking process should underpin production activity.”

“SMEs’ financing conditions have worsened, with credit access becoming more difficult and funding costs being high. This adds to the case for more targeted easing, in our view.”