China SMEI: Demand weakened in June – Commonplace Chartered

Headline SMEI eased additional to a nine-month low of fifty.1 in June as new orders shrank. Export-oriented SMEs’ efficiency sub-index fell under the 50 stage, reflecting the tariff chill. Non-manufacturing SMEs’ efficiency stayed in contractionary territory for a 3rd straight month. SMEs reported a marginal enchancment in entry to financial institution credit score, whereas financing prices rose, Commonplace Chartered’s economists report.

Tariff influence being felt

“Our proprietary Small and Medium Enterprise Confidence Index (SMEI; Bloomberg: SCCNSMEI ) fell additional by 0.1pts to 50.1 in June, the bottom studying for the reason that stimulus bundle was introduced in September 2024 (Determine 1). That mentioned, modifications in all the symptoms had been marginal. The general efficiency sub-index dropped 0.2ppts to 50, indicating stalled exercise. Solely the gross sales and output worth sub-indices stayed above 50, whereas the brand new orders sub-index slipped into contractionary territory once more after Lunar New Yr disruptions in February. That mentioned, the expectations sub-index improved modestly to 50.2, primarily on a greater gross sales and financing outlook.”

“Manufacturing exercise slowed in June on stalled new orders and declining profitability, regardless of strong gross sales. We count on the official manufacturing PMI to edge down 0.2ppt to 49.3 in June. Non-manufacturing SMEs’ efficiency sub-index stayed under 50 for a 3rd consecutive month on slack enterprise exercise in actual property, finance, retail gross sales and wholesale, and leasing and business providers. In the meantime, export-oriented SMEs’ efficiency sub-index fell under the 50 threshold, reflecting the influence of tariffs on gross sales and new orders.”

“The credit score sub-indices stayed at 50 for a 3rd month in June. Whereas SMEs reported barely simpler entry to financial institution credit score versus Might, financing prices rose modestly. Liquidity situations remained secure. USD/CNY alternate fee appreciation expectations inched up, whereas expectations amongst most respondents remained secure.”