China's official manufacturing PMI remained unchanged in October at 49.8. The private sector Caixin/Markit manufacturing PMI was firmer at 48.3 from 47.2 in September. As a whole, the readings suggest that the manufacturing sector has stabilized somewhat due to monetary policy easing.
Broadly, this suggests a "managed stabilization" as Chinese authorities intend to strike a balance among growth, reforms and market stabilization. To a large extent, it is also of China's interest to lower growth trajectory in a "managed stable" manner.
"Looking at the data in different real sectors, the power generation, steel production and housing sales all slowed in October. This suggests that the overall economy is still facing downward pressure. We could see another 50bps RRR cut before the end of this year, while PBoC will most likely refrain form a further rate cut in order to keep decpreciation pressure on CNY in check as the Fed is expected to hike in December", says Commerzbank.
