China’s manufacturing last month expanded at its fastest pace in five months, in a sign that government measures to counter an economic slowdown are gaining traction.
The Purchasing Managers’ Index (PMI) rose to 50.8 last month, the National Bureau of Statistics of China and China Federation of Logistics and Purchasing said yesterday in Beijing, compared with the 50.7 median estimate of analysts surveyed by Bloomberg News.
April’s reading was 50.4, with any figure above 50 indicating expansion. Estimates for last month’s figure ranged from 50.1 to 51.5.
Photo: Reuters
The Chinese Communist Party has stepped up the pace of stimulus measures, including faster spending from government budgets and increased railway investment, to help meet an official growth target of about 7.5 percent this year.
The Chinese State Council — the country’s Cabinet — has said it would cut reserve requirements for some lenders as authorities contend with a property market slump.
“The so-called mini-stimulus is helping to stabilize the economy,” said Liu Li-Gang (劉利剛), chief Greater China economist at Australia & New Zealand Banking Group Ltd in Hong Kong.
At the same time, the PMI’s rebound is not as strong as that seen in the same period in previous years and the “central government needs to make a bigger move,” he added.
Liu maintained his forecast for a “high possibility” of a cut in banks’ reserve requirement ratio in the second or third quarter.
Stimulus measures are showing signs of helping companies other than the biggest ones, with a PMI for medium-sized enterprises last month rising to 51.4 from 50.3 in yesterday’s data. That compared with 50.9 for large companies, up from April’s 50.8, and 48.8 for small enterprises last month that is unchanged from the previous month.
Annual growth in industrial production and retail sales decelerated unexpectedly in April. A cooling property market threatens to limit any rebound, with a 22 percent drop in new construction in the first four months of the year and a drop in home prices last month from April that was the first in almost two years, according to SouFun Holdings Ltd (搜房網), owner of nation’s biggest real-estate Web site.
The world’s No. 2 economy is projected to grow 7.3 percent this year, which would be its weakest pace since 1990, analysts forecast last month. Expansion slowed to 7.4 percent in the first quarter from a year earlier, compared with 7.7 percent in the previous period.
Yesterday’s report is “slightly better than expected but the improvement is still quite minor,” said Shen Jianguang (沈建光), chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong.
While mid-sized companies are benefiting from the fiscal stimulus, the State Council’s latest action underscores the importance of reducing financing costs for companies and home buyers, he said.
The interbank market shows that the People’s Bank of China is easing monetary policy, Standard Chartered PLC analysts said in a report on Wednesday last week. The seven-day repurchase rate, a gauge of funding availability, dropped 0.93 percentage points last month to 3.25 percent, according to a daily fixing.
The government has intensified steps to sustain growth in recent weeks, even after Chinese President Xi Jinping (習近平) said the country needs to adapt to a “new normal” in terms of the pace of expansion.
The government is likely to “step up targeted measures,” such as the reserve ratio cut for qualified banks announced late last month, while resisting calls for bigger steps including cutting benchmark interest rates and reserve ratios for all banks, Lu Ting (陸挺), head of Greater China economics at Bank of America Corp in Hong Kong, said in an e-mail.
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