China: Caixin PMI plunges - ING

Robert Carnell, chief economist at ING, points out that the China’s Caixin PMI index has plunged from 49.7 in December to only 48.3 in January, thereby showing just how important it is for China and the US to secure a trade deal.

Key Quotes

“In contrast to yesterday's official PMI release, where the headline was surprisingly upbeat, but most of the subcomponents were worrying, there were some bright spots in the underlying components for the Caixin index.”

“The dichotomy between the official and Caixin PMIs is really a dichotomy between the large state-owned and domestically focussed firms supported by bank lending and PBoC monetary and credit stimulus measures, and the smaller, more externally focussed private sector.”

“As China has become larger, richer, and more complicated, it is becoming harder for the authorities to fix all problems by diktat. Market mechanisms as solutions to these problems are still inadequate in some areas, as this survey highlights.”