The latest round of PMI data suggest that the Chinese cycle is peaking in Q1. Our preferred leading indicators have pointed to moderation for Chinese activity but the exact timing has been uncertain. However, we now expect the peak will be in Q1 and look for activity to show a moderate decline during 2017. It implies less support for EM assets, continued downward pressure on CNY and limited further tightening of monetary conditions by policy makers. The biggest risk to China is a US-China trade war later this year.
Source Danske Bank
