Both the official manufacturing and non-manufacturing PMIs continued to weaken in Nov against consensus expectation for a slight improvement after the National Day holidays in Oct. Despite the PBOC stepping up liquidity injections, activities have also failed to pick up. 

Within the non-manufacturing sector, the construction activity index strengthened in response to the government’s support measures for infrastructure and the property sector but the services activity index tumbled into contraction for the first time this year. The economic momentum thus appears to be much weaker than expected. 

The surge in liquidity injections and possible relaunch of the pledged supplementary lending (PSL) facility may delay further rate cuts to 1Q24 or even 2Q24. Thus, we push back our call for further interest rates cuts to 1Q24. Another 25 bps cut to banks’ reserve requirement ratio (RRR) may be delivered earlier to provide additional market liquidity.