According to a recent research note by BBVA, which was published on September 1 2016, China's August PMIs show that the China market is on the uptick. Below are the key parts of this important research note that shows that the China market may be back on track:
The pickup of the official manufacturing PMI is broad based by categories: The improvement in the production index and new order index are pronounced in August. In particular, the former increased to 52.6 from its July reading of 52.1 while the latter rose to 51.3 from 50.4 in July.
Export order index also picked up significantly to 49.7 from 49 in the previous month although the
below-50 outturn still points to headwinds from the external environment. The employment and raw
material stock indexes remain subdued while the index of delivery time is flat from its July outturn.
Looking ahead, more easing measures will be implemented in the rest of this year: Due to the domestic growth headwinds and the weak recovery of external demand, policy stance needs to continue to be pro-growth, in order to offset the undergoing deleveraging and to avoid hardlanding. In this respect, we project another two RRR cuts with 50 bps each time and one asymmetric interest rate cut in the rest of 2016. The authorities will also implement more fiscal expansionary measures to boost public spending and infrastructure investment.