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World Economy

26

OPEC Monthly Oil Market Report – September 2017

Graph 3 - 26: Chinese CPI and PPI

Graph 3 - 27: Chinese trade balance

Liquidity conditions in China

will remain moderately tight in the coming quarters. The government's

deleveraging campaign and regulatory crackdown on shadow banking appeared serious and has the support

of China's top political leadership. The government has also indicated that it is comfortable with the current

lower level of credit growth. As the economic growth slowdown has stabilised, the Chinese authorities should

continue their efforts to mitigate financial-sector risk. Nevertheless, should the economy decelerate more

sharply than expected, the Chinese government is likely to swing towards the growth support end of the

policy balance and loosen monetary policy.

Graph 3 - 28: Chinese merchandise trade by selected countries, NSA

Profits of industrial enterprises in China rose by 21.2% y-o-y in 1Q17, compared with an increase of 22% in

the first six months of the year.

The

Caixin Manufacturing PMI

in China rose to 51.6 in August from 51.1 in July and beat the market

consensus of 50.9. It was the third straight month of expansion in manufacturing activity and the fastest since

February, as new orders surged to an over 3-year high and new export orders increased by the greatest

extent since early 2010. Also, business confidence hit a 5-month high and companies expanded their

production of schedules. The official non-Manufacturing PMI in China fell to 53.4 in August 2017 from 54.5 in

July. It was the weakest reading since May 2016, as new orders’ growth slowed (50.9 from 51.1 in the prior

month) while new export orders contracted (49.0 from 52.1) and employment (49.5 from 49.5) declined for

the eighth straight month. Also, orders in hand (44.0 from 43.9) continued to drop amid softening suppliers'

delivery time (51.1 from 51.7). At the same time, business sentiment remained strong (61.0 from 61.1) and

selling prices (51.5 from 50.9) increased for the second month in a row. The

Caixin China Services PMI

rose to 52.7 in August of 2017 from 51.5 in July, beating the market consensus of 51.8. It was the fastest rise

-10

-5

0

5

10

15

20

25

Aug 15

Oct 15

Dec 15

Feb 16

Apr 16

Jun 16

Aug 16

Oct 16

Dec 16

Feb 17

Apr 17

Jun 17

Aug 17

CPI

PPI

Official interest rate

Average house price in 100 cities

Sources: China Index Academy, China National Bureau of

Statistics, Soufan and Haver Analytics.

% change y-o-y

181

194

-132

-147

48

47

-200

-150

-100

-50

0

50

100

150

200

250

Jul 16

Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

US$ bn

Exports

Imports

Trade balance

Sources: China Customs and Haver Analytics.

-30

-20

-10

0

10

20

30

40

US exports US imports EU exports EU imports UK exports UK imports ASEAN

exports

ASEAN

imports

US$ bn

Jul 15

Aug 15 Sep 15 Oct 15

Nov 15 Dec 15 Jan 16 Feb 16 Mar 16

Apr 16

May 16 Jun 16 Jul 16

Aug 16 Sep 16 Oct 16

Nov 16 Dec 16

Jan 17 Feb 17 Mar 17 Apr 17

May 17 Jun 17 Jul 17

Sources: China Customs, Haver Analytics and OPEC Secretariat.