Wed, Nov 01, 2017 - Page 11 News List

China factory PMI falls on pollution cleanup efforts

Bloomberg

China’s official factory gauge fell this month, with new orders and prices leading the decline, as officials increasingly prioritize a campaign to clamp down on polluting industries and rein in debt.

The manufacturing purchasing managers’ index (PMI) fell to 51.6 last month, compared with 52 forecast in a Bloomberg survey and a five-year high of 52.4 in September.

The non-manufacturing PMI stood at 54.3, compared with 55.4 in September.

Numbers higher than 50 indicate improving conditions; readings below 50 signal a worsening outlook.

With the Chinese economy transitioning away from a growth-at-all-costs model, officials are prioritizing the environment and a push to tame credit growth — key policy directions that were highlighted during the twice-a-decade Chinese Communist Party National Congress last month.

Still, China is poised for its first full-year growth acceleration, defying predictions of a sharper slowdown triggered by the leverage campaign and property risks.

“The data suggest growth remains on track to hit the government’s ‘6.5 percent or above’ target for this year,” Bloomberg Intelligence economist Fielding Chen (陳世淵) wrote in a note.

“Continued, if slightly milder, growth momentum would provide leeway for the government to push ahead with its deleveraging agenda,” Chen wrote.

“The overall steadiness in the economy remains intact,” said Zhao Hongyan, China economist at Huatai Financial Holdings Ltd in Hong Kong. “The party congress didn’t send any signals for upcoming massive stimulus, so it’s unlikely this year or next.”

The lower PMIs might indicate a moderation this quarter, Betty Wang, Hong Kong-based senior economist at Australia & New Zealand Banking Group Ltd, wrote in a note. “But it is unlikely to change the broad picture of steady growth in 2017.”

“China poses little near-term threat to the global expansion,” Bill Adams, senior international economist at PNC Financial Services Group in Pittsburgh, Pennsylvania, wrote in a note. “Today’s latest data are emblematic not only of China’s economy, but also of the global economy in 2017: Growth is moderate, but reassuringly broad-based.”

“Tighter environmental supervision has definitely impacted the PMI in October as shown in the breakdown,” said Gao Yuwei (高玉偉), a researcher at Bank of China Ltd’s (中國銀行) Institute of International Finance in Beijing. “Yet the strong industrial profits last month indicated that manufacturing is doing fine. As the winter season nears, factories in the north may have to reduce production due to pollution restrictions, but the drag effect won’t be so serious as manufacturing’s overall contribution to GDP growth has been declining.”

PMI for high energy-consuming and highly polluting sectors sank to below 50, as “some regions intensified their efforts to clean up the environment,” the Chinese National Bureau of Statistics said in a statement.

New orders declined to 52.9 from 54.8, the biggest drop since May 2012 as input and output prices both slid, the statement said.

Conditions for small and medium-sized enterprises deteriorated, it added.

Steel industry PMI slipped to 52.3, while higher-end and consumption-related activities continue to drive growth, the statement said.

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