Econintersect: China’s manufacturing sector is showing solid grwoth from numbers released for both PMI (Purchasing Mangers’ Index) surveys. Both the 
official PMI from the government and the HSBC PMI reported 51.7 for July. Numbers above 50 indicate manufacturing is expanding. The official PMI survey covers large and mainly government owned enterprises, while the HSBC survey covers small and mid-sized mostly privately owned companies. It is not often that the two surveys agree exactly as they do for July. In fact a number of times during the past few years the two have differed on whether manufacturing was expanding or contracting.
The readings represent an 18-month high for the HSBC PMI and a 27-month high for the official PMI. The following summary was released by Markit for the HSBC survey:
There are some reasons to be cautionary about China’s prospects. The country is embarking on an effort to rebalance to have less dependance on exports and infrastructure / production investment by increasing domestic consumption for a more sustainable balanced economy. This rebalancing is expected to create stress on economic growth patterns for the country. Also of concern is the continuing decline of manufacturing employment which fell for the ninth consecutive month. Another factor is the cooling of the real estate markets in China which could prove a significant drag if a persistent decline sets in for property development and sales.
However, a number of analysts have suggested there are few immediate concerns for China. From Julian Evans-Pritchard, an economist at Capital Economics, quoted by Reuters:
“There is no reason in China to be concerned about growth right now. “It’s a good time for policymakers to step back from stimulus and concentrate on reforms.”
Commenting on the China Manufacturing PMITM survey, Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, made the following comment:
“The HSBC China Manufacturing PMI rose to 51.7 in the final reading for July, the highest since early 2013. This is slightly lower than the flash reading released earlier, as several sub-indices saw small downward revisions. Nevertheless, the economy is improving sequentially and registered across-the-board improvement compared to June. Policy makers are continuing with targeted easing in recent weeks and we expect the cumulative impact of these measures to filter through in the next few months and help consolidate the recovery.”
The last 2 1/2 years of the official PMI is displayed in the following graph from Trading Economics:
The historical overview of the HSBC PMI is provided by Markit:
Sources:
China PMIs jump to multi-month highs in July, add to view economy is steadying (Koh Gui Qing, Reuters)
China Manufacturing PMI (Trading Economics, 01 August 2014)
Manufacturing PMI strengthens to 18-month high in July (Press release, Markit, 01 August 2014)
