Salient to Investors:

Shen Jianguang at Mizuho Securities Asia said it is too early to say an economic rebound has begun in China  as there is still a strong bias towards larger enterprises and coastal areas in terms of fiscal and credit policy implementation, while small and mid-sized companies appear to operate with minimal policy support.

Wang Tao at UBS said divergences in the manufacturing indexes are common given their different focus and coverage, and the decline in the official PMI’s gauge for smaller companies is consistent with the HSBC index.

Ken Peng, a BNP Paribas said business activity at small businesses is much weaker than bigger companies, showing sluggish growth momentum, while the official manufacturing PMI’s output sub-index was higher than the one for new orders, not good because it reflects growing inventories at manufacturers.

Sun Chi at Daiwa Capital Markets said even with the drop in the index, service industries are expanding at a quite high rate, and economic growth will be relatively flat in the coming months with the absence of a major policy shift. Sun said big Chinese enterprises are at the front of the line to benefit from pro-growth policies and eased credit.

Service industries accounted for 45 percent of Chinese GDP in 2012 versus 41 percent in 2003 – US services comprise 90 percent of the US economy.

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