Analysts at Standard Chartered note that China’s August SME survey showed early signs of stabilization in the economy.

• “The headline SMEI (Bloomberg: SCCNSMEI <index>) edged up to 54.5 in August from 53.8 in July, with the growth momentum indicator (new orders minus finished-goods inventory) picking up again after dropping for three consecutive months. The services sector showed an improvement in performance, while the manufacturing sector disappointed. Domestically-focused SMEs outperformed exporters.
• Both the ‘current performance’ and the ‘expectations’ sub-indices edged higher versus July, though they remained relatively low.
• SMEs’ expectations of real activity turned benign, pointing to a possible mild recovery later this year.
• SMEs’ credit conditions remain a concern, with the ‘credit’ sub-index easing in August after improving in July.
• The recent loan prime rate (LPR) reform, making it the new reference rate for loans, should improve interest rate transmission. However, to consistently lower financing costs for SMEs, we think the authorities will need to offer cheaper funding to the banking system.”