Econintersect: China’s official PMI (Purchasing Managers Index) for manufacturing rose for the first time in over a year, registering a reading of 50.6 for November. This was the highest reading in seven months and was the second month in a row above 50, the demarcation between contraction and expansion. The reading in October was 50.2, following readings below 50 for both August and September.
The final reading for the HSBC PMI had a reading above 50 for the first time in 13 months, unchanged from the preliminary (flash) reading of 50.5 last week.
The non-manufacturing PMI, which has been weel above 50 all year, came in at 55.6 only slightly changed from 55.5 in October. Construction services was the strongest area in the non-manufacturing PMI.
Reuters quotes HSBC’s chief China economist Hongbin Qu:
“This confirms that the Chinese economy continues to recover gradually.”
A note released with the official government report indicated that the strength was in larger, government run companies with mid-sized, and especially small, companies seeing a “retrenchment.” Specifically mentioned for weakness were transportation and food industries. Reuters said there was concern that China was still relying too much on government investment for growth rather than private sector firms. Rebalancing may become more and more difficult if this trend continues. Most economists think that for a sustainable economy going forward China must grow domestic consumption and rely less on government investment and exports.
Two more quotes from Reuters follow. Dong Xian’an, economist with Peking First Advisory said:
“The improving numbers are mostly because of government investment. From the second quarter the government has unleashed a lot of projects, and that has started to be felt in the economy, but it’s not a very healthy recovery yet.”
Xianfang Ren and Alistair Thornton of IHS Global Insight were quoted:
“Whilst we feel that the economy has been stabilized through the short-term, we feel that the manner in which activity has been revived will retard China’s economic reform agenda and make the transition onto a sustainable footing all the more tricky.”
- China PMI shows growth reviving, but uneven (Lucy Hornby, Reuters)
- China: Manufacturing returns to growth (GEI News, 01 November 2012)