China SMEI: Activity slows in February – Standard Chartered

Headline SMEI edged down 0.5pts to 50.4 in February as current performance sub-index fell below 50. Tourism-related services activity dropped m/m after holiday boost; real estate performance rebounded. Manufacturing SMEs reported m/m decline in production, sales and new orders, partly due to seasonality. Credit conditions turned more favourable on lower funding costs for SMEs; FX expectations stabilised, Standard Chartered’s economists note.

Performance deteriorates, while expectations improve

“Our proprietary Small and Medium Enterprise Confidence Index (SMEI; Bloomberg: SCCNSMEI ) retreated to 50.4 in February from 50.9 in January. The performance sub-index fell sharply by 2pts to 48.5, into contractionary territory again, registering the lowest reading since end-2022 partly due to holiday distortions. On the bright side, the expectations index improved, with all sub-indices rising into expansionary territory, suggesting the setback might be temporary.”

“Manufacturing SMEs reported a m/m decline in sales, production, new orders and profitability. We think Lunar New Year holiday disruptions have been partly reflected in this month’s survey. That said, average key sub-indices’ readings for 2M-2025 fell below 50, likely reflecting the impact of additional tariffs. Tourism-related services activity, such as transport, retail and wholesale, and accommodation and catering, has normalised, after rising sharply in January. Real estate performance has recovered. Construction activity remains subdued.”

“The credit sub-indices moderated slightly to 51.8 in February as receivables turnover lengthened. Meanwhile, credit conditions have turned more favourable for SMEs as financing costs trended lower from January. SMEs’ exchange rate expectations stabilised in February after depreciation expectations had spiked in prior months.”