China's economy requires additional policy support.

The Chinese yuan remains stable at around 7.26 yuan per dollar, supported by growing expectations of additional economic stimulus measures from the Chinese government. These measures may be discussed during a key political meeting scheduled for mid-December. Additionally, the yuan has been bolstered by a weaker U.S. dollar ahead of employment reports, which could significantly influence the Federal Reserve's interest rate decisions.

Investors are hopeful that the Chinese government will introduce more measures to stimulate the economy after signs of slowdown in several sectors. Moreover, rising trade tensions are pressuring the People's Bank of China (PBOC) to adopt more monetary easing policies.

China's services PMI fell to 51.5 in November, down from 52.0 in October and below market expectations of 52.5. The latest data indicates a slowdown in new business growth and foreign sales. However, employment increased for the third consecutive month, albeit slightly. Input costs dropped to their lowest in 53 months, while output prices fell sharply due to intensified competition. Despite this, business confidence reached a one-year high, driven by improving economic conditions and anticipated government support to boost sales. Concerns remain in some areas, including future export capabilities.

Meanwhile, the manufacturing PMI rose to 51.5 in November from 50.3 in October, exceeding market expectations of 50.5. This marks the second consecutive month of expansion and the fastest growth in factory activity since early in the year. The increase was fueled by a sharp rise in both domestic and export orders. Production also continued to grow, prompting firms to increase raw material purchases and inventory levels to meet rising demand. However, input costs rose due to recovering demand, improved economic conditions, and government support measures.

Profits of China's industrial companies fell by 4.3% year-on-year to 5,868.04 billion yuan in the first 10 months of 2024, exceeding forecasts of a 3.5% decline. This drop reflects a slowing economy, driven by uncertain demand, despite slight improvement in manufacturing. Deflation risks and a weak real estate sector continue to pressure corporate spending, with state-owned enterprises' profits declining further by 8.2%, following a 6.5% drop earlier this year. However, companies in computer equipment and communication sectors have maintained steady profit growth.

China's 10-year government bond yield slightly rose to around 1.95%, reflecting improved market sentiment amid expectations of further monetary easing by the PBOC to stimulate the slowing economy. Investors are closely monitoring upcoming domestic economic data and next week's inflation figures.