Last night, Chinese PMI rose from 50.3 to 50.4, representing a smaller-than-expected rebound in the country's manufacturing sector.
Ting Lu, a China economist at Bank of America, writes:
We maintain the “mini-stimulus” view
Data released today displayed some moderate improvement, but the improvement is not big enough to deliver an around 7.5% growth target for the whole year, in our view. We expect Beijing to implement its mini-stimulus—some small-scale growth supportive measures focusing on special credit policy in the rural area and fiscal spending in social housing, urban infrastructure and central & western region infrastructure. The targeted RRR for rural banks announced in April (first by the State Council and then by the PBoC) means the chance for universal RRR cut is quite low, but we expect interbank rates will fall back to below 4%.
For more on last night's report, see our writeup here.