BofAML: Mini-Stimulus Will Help Sustain China’s Economic Rebound

The upward trend in China’s HSBC purchasing managers’ index (PMI) number is likely to continue in the coming months. It may gradually move to the range of 49 to 50 in the next few months, says Bank of America Merrill Lynch in a research report.

The China HSBC flash PMI recovered slightly to 48.3 in April from the 48.0 final reading in March. The small recovery was driven by the "new orders" and "output" component of the index.

Despite still being below 50, the line dividing economic expansion from contraction, the small rise of the April flash PMI still suggests some marginal improvement.

The PMI index will continue to recover because of the mini-stimulus currently being implemented by the Chinese government and some possible recovery in export demand.

BofAML says it expects Beijing to implement its mini-stimulus, or the small-scale growth supportive measures.

The Chinese government has announced plans on special credit policy in the rural area, fiscal spending in social housing, and urban infrastructure projects. It also announced targeted reserve requirement ratio cuts for rural banks.

Therefore, BofAML says it expects China’s GDP growth to rise to 7.5% in the second quarter from 7.4% in during the first quarter.

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