China to Increase Liquidity Following Weak PMI
China's excessively high interbank rates in recent weeks, due partly to seasonal factors and insufficient liquidity injection from the central bank, may have affected bank lending and increased corporate funding costs, Deutsche Bank says in a research report. It expects the central bank to inject more liquidity in the coming weeks by reserving repurchase and even cutting the reserve requirement ratio. It also expects industrial activities to remain weak in the coming months due to low export orders and further inventory destocking. HSBC's flash China manufacturing purchasing managers index declined to 48.3 in June from 49.2 in May, suggesting that external demand will remain sluggish in the near term.
HSBC Cuts China Outlook
HSBC has cut its China growth forecasts to 7.4% from 8.2% for 2013 and to 7.4% from 8.4% for 2014, reflecting the Chinese government's determination to solidify long-term growth through reforms rather than fiscal stimulus. The reforms include a recent ban on lower quality coal imports and taxation, such as a shift to price-based rather than volume-based resources taxes and a standardization of the sustainable development fees and other taxes that companies pay.
Steel Output May Be Maxing Out
China's daily crude steel output was 2.15 million tons in the first 10 days of June, basically unchanged from the previous 10-day period but down 2% from the first 10 days of May, suggesting that output may have peaked, according to the China Iron and Steel Association. If this trend continues in the rest of June, monthly output will likely fall and therefore steel prices might begin to rise. Deutsche Bank says in its latest Asia Steel Supply/Demand Outlook report.
Top 100 Retailers' Revenue Slows in May
Revenue at China's 100 largest retailers rose 11.6% in May from a year earlier; the rate was 5.2 percentage points slower than in April, according to Cncic.org. Jewelry sales were up 28.3% year on year, food sales up 8.7%, home appliance sales up 6.5% and clothing sales up 6.1%.
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