Standard Chartered's proprietary Small and Medium Enterprises Confidence Index (SMEI) for China showed a broad-based weakening in December. This 100% SME-focused index measures current conditions, credit conditions and business expectations for the next three months. The SMEI fell to 56.58 in December from 58.29 in November; the weakness was broad-based.Standard Chartered Research further maintains:
- Fundamentals remain weak for SMEs amid a renewed deterioration in demand and deflationary pressure
- Credit conditions remain tight, and the three-month outlook has worsened. The credit index edged down to 54.0 in December from 54.4 in November, indicating that SMEs' financing costs are rising.
- We believe fundamentals for China's SMEs remain weak amid the broader economic slowdown, which calls for more policy support.
- We expect one more rate cut in Q1-2015 to lower funding costs and support growth in China.
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