China economy ramping up? Listen to the world's largest shipper!

While the multi-trillion building program in the 2008 crisis has not been replicated yet, hundreds of new projects are indeed underway throughout China. Observers believe that a large scale build “a la 2008” is being held in reserve and will be announced by year-end, a probable scenario when looking at the behavior of the Maersk stock, the world largest shipper.

China Stimulus, what we already know

While a behemoth infrastructure bill is certainly in the cards, China has already taken the following measures to maintain its economy afloat:

• Low-income earners are now able to delay payment of social insurance premiums
• Every employment-related government charge will be canceled
• A 5% discount in the price of electricity paid by companies will also be extended year-end.
• Charges for broadband and dedicated internet access services have been cut by 15% on average.
• ​Rents for state-owned premises were lowered or in some cases exempted, and property owners have been told they may defer property-related payments.

The Beijing government placed a local special bond quota at 3.75 trillion yuan (US$527 billion), vs the 2.15 trillion yuan in 2019 and will issue 1 trillion yuan in special Treasury bonds, aiming at a fiscal deficit ratio of 3.6% vs 2.8% last year. As the special Treasury bonds are not in the central government’s budget, they don't add to increasing the deficit-to-gross domestic product (GDP) ratio.

With all these measures, PMIs both rose from May and beat expectations last night. The government's official Manufacturing PMI rose from 50.6 to 50.9 (beating expectations of 50.5). The government's official Services PMI rose from 53.6 to 54.4 (beating expectations of 53.6).

Produced in partnership with The Bear Traps Report / Bastien Chenivesse