Caixin services PMI expands the most in three months
China’s Caixin services survey expanded at a quicker pace in November, contrasting with last week’s official NBS data.
IGTV’s Angela Barnes tells us about the conundrum the People’s Bank of China is facing, trying to support the world’s second largest economy without weakening its currency further.
(AI Video Trancript)
China's growth in November
In a recent survey conducted by Capstone, it was found that the services sector in China experienced growth in November. This was indicated by the services purchasing managers' index (PMI), which reached a three-month high of 51.5. However, it is important to note that while there was growth, it was still lower than the long-term average for the sector. This paints a somewhat mixed picture for the services industry in China. On the other hand, the official survey, which focuses on larger companies, surprisingly showed contraction for the first time since December of last year. This has led to calls for the implementation of additional stimulus measures.
The Chinese yuan
The survey also highlighted a decline in employment as some businesses remained cautious about hiring new employees. Turning our attention to the exchange rate between theUSD and the CNY, there hasn't been much change recently. Although the yuan showed some strength in November, it still remains weak compared to the dollar. The property market in China is also experiencing a decline in sales, investment, and home prices. This situation is increasing pressure on Chinese authorities to prevent any financial instability from spreading.
The People's Bank of China
Despite the challenges they face, Chinese authorities would prefer to avoid implementing further stimulus measures as it would weaken the yuan. They believe that maintaining a stable exchange rate is crucial. The governor of the People's Bank of China has assured that monetary policy will continue to support growth. However, they also plan to introduce structural reforms gradually to reduce the economy's dependence on infrastructure and property.
To summarize, the services sector in China showed some expansion in November, although not as strong as the long-term average. On the flip side, the official survey revealed contraction and a decrease in employment among larger companies. Additionally, the Chinese yuan remains weak compared to the U.S. dollar, and recent data on the property market has put pressure on authorities to prevent any financial problems from spreading. The Chinese government aims to maintain supportive monetary policy to bolster growth, while working on implementing structural reforms to reduce dependence on infrastructure and property in the long ru
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