"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 2 November: RatingDog to report China’s Manufacturing Purchasing Managers’ Index (PMI) for October
• 2 November: RMB 56 billion (USD 8.4 trillion) in seven-day reverse repos mature
• 3 November: Hong Kong to report September retail sales statistics
• 3 November: Hong Kong to report Q3 2026 Gross Domestic Product (GDP) growth rate
• 4 November: RatingDog to report China’s Services PMI for October
• 5 November: Taiwan to report October Consumer Price Index (CPI)
• 5 November: Taiwan to report October Producer Price Index
• 7 November: China to report October foreign exchange reserves level

The calendar for macroeconomic data will be relatively quiet entering November. In the absence of top-line data, the Business Conditions Index (BCI) – a widely followed survey-based indicator – provides valuable insight into China’s underlying economic conditions.

The latest BCI readings suggest that the economy is hovering over a cyclical bottoming zone. October headline BCI stood at 49.2, down modestly from 49.5 in September but remaining above its August low. The trajectory this year reveals dual troughs in June and August, driven largely by pressure on small and medium-sized enterprises amid sharper year-on-year contractions in property sales. Volatility in global tech asset valuations also added to headwinds, as reflected in a notable pullback in the Emerging Industries PMI readings between June and August. However, strengthened pro-growth policy support and accelerated fiscal implementation since late September have provided incremental momentum.

A granular look at component indices reveals resilient business sales alongside persistent margin pressures. The sales index held above 60, beyond the expansion threshold, supported by earlier PPI strength. Conversely, elevated oil prices weighed on earnings. The total cost index reached its third peak of the year in October, causing the profit index to retreat. Meanwhile, the profit index held above its August low, reinforcing August as the earnings trough. Price expectations remained stable across supply chains as excess capacity prevented upstream cost increases from spilling over into midstream and downstream prices.

Forward-looking expectations for business investment and hiring improved notably at the margin: the investment and hiring indices rose by 2.5 and 1.8 points month-on-month, respectively, reaching peak levels from July and outperforming the headline figure. This shift highlights the positive impact of late-September pro-growth policies that included mortgage rate subsidies, rate cuts for supplementary lending, and expanded relending facilities. Implementation gained further traction in October through the deployment of additional credit lines and issuance of more special-purpose bonds. Overall, the October BCI data reinforce signals that China’s slowdown is bottoming out. The confirmation of a profit trough and improving corporate sentiment should help compress risk premiums and support a valuation recovery for cyclical assets.

Chinese equities continued to trade lower over the past week. As of Thursday, 29 October, the MSCI China Index shed 1.07 per cent while the Shanghai Composite fell by 1.06 per cent, the Shenzhen Component dropped 4.59 per cent, and the ChiNext Index lost 6.2 per cent. Large-cap shares continued to outperform small- and mid-cap peers, while value shares generally outperformed growth.

Government policy seeks to reinforce market stability. At the 2026 Financial Street Forum Annual Conference in Beijing, regulators signalled clear support by establishing a specialised liquidity facility for non-bank financial institutions to manage redemption pressures. Concurrently, market-stabilisation funds have expanded purchasing across a broader spectrum of securities, demonstrating a firm commitment to breaking negative liquidity feedback loops and setting the stage for a broader recovery once market conditions normalise.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.

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