China: Services to outperform manufacturing – ING

According to Iris Pang, Research Analyst at ING, China’s upbeat consumption demand will continue to support steady economic growth and CNY appreciation trends.

Key Quotes

“As it is nearer the time of peak shipment of export orders, we do not think manufacturing activities in China will be particularly buoyant in the last two months of the year. We expect official manufacturing PMI in November to be unchanged at October’s 51.6 level (consensus: 51.5), as also reflected in previous month’s slower new export orders, new orders and imports, though these PMI sub-indexes remained above the 50 threshold level indicating expansion.”

“Our forecast for non-manufacturing PMI in November is 54.5, two ticks above the October level. We count on increase in demand for extra logistics services generated by the 11-11 online buying festival activities in the telecom and satellite services sectors. If true, this would be a confirmation that China’s online shopping, online payment platforms and the impact on logistics has changed consumer behaviour, and which could be associated with more imports of consumer goods.”

“Upbeat consumption demand, which we expect to make up for slower activity in the real estate sector, will continue to support steady economic growth and CNY appreciation trends. We forecast a 6.8% GDP growth for the whole year of 2017 and appreciation of CNY vs USD to 6.50 by the end of the year. The only pull back could be too-fast financial deleveraging, though this is unlikely as the central bank understands that liquidity would be tighter than usual nearer the end of the year.”