China: Economy softened with a cooling property market - Natixis

After the strong growth in the first half of 2017, the Chinese economy softened slightly in July, especially on the production side, explains Alicia Garcia Herrero, Chief Economist at Natixis.

Key Quotes

“Official PMI retreated slightly to 51.4 although the Caixin PMI improved to 51.1. This points to a moderation of manufacturers’ expectations given the wider coverage of the official PMI.”

“Property prices continued to cool in the first-tier and second-tier cities, whereas the heat persisted in the third-tier cities.”

“The RMB entered the phase of gradual appreciation and reached a twelve-month peak. The valuation effects from strong currency against the greenback also supported FX reserves to expand for the 6th consecutive month to the highest level entering 2017.”

“Market liquidity tightened as shown by plunging new banks’ loans (from RMB1540bn in June to RMB826bn in July).  All in all, the less liquid financial environment and cooling property market pose headwinds to the economy’s growth outlook.”