Manufacturing activity in China hit a 13-month high last month, HSBC Holdings PLC said yesteray, in another sign that the world’s second-largest economy is emerging from a drawn-out slumber.
The banking giant’s purchasing managers’ index (PMI) hit 50.5 last month, up from 49.5 in October, putting it above the 50 mark that indicates growth. A reading below signals contraction.
The figure signals a return to growth after 12 consecutive months of contraction as the crucial manufacturing sector has been hit by a global slowdown as well as the debt crisis in key market Europe, where demand for Chinese goods has slumped.
It is the highest reading since October last year, when the figure was 51, HSBC data show.
China’s official PMI reading also showed expansion last month for the second month in a row, hitting 50.6, compared with 50.2 in October and 49.8 in September.
The HSBC index, compiled by information services provider Markit, tracks manufacturing activity and is a closely watched barometer of the health of an economy.
“This confirms the Chinese economy continues to recover gradually,” Hong Kong-based HSBC economist Qu Hongbin (屈宏斌) said.
The bank expects China’s economic growth to pick up modestly to about 8 percent in the fourth quarter as government “easing measures continue to filter through,” he added.
New export orders increased at “a market rate,” with a number of firms linking the rise to a pick-up in demand, particularly in Europe and the US, HSBC said.
Tang Jianwei (唐建偉), a Shanghai-based economist for the Bank of Communications (交通銀行), tipped conditions to further improve next year.
“Next year the economic outlook will be better, especially with the coming of the Chinese New Year when demand will increase. We will likely see steady improvement in PMI in the next few months,” he said.
China’s economic growth hit a more than three-year low of 7.4 percent in the third quarter from July to September.
Yet recent data has fueled optimism that the worst is over. Exports, industrial production, retail sales and fixed asset investment — a key gauge of infrastructure spending — have all shown improvement.
China cut interest rates twice this year and decreased the amount of funds banks must keep in reserve three times since December last year to encourage lending. However, it has avoided the kind of huge stimulus package it tabled after the global financial crisis in 2008 and 2009 which sent inflation soaring.
In related news, China’s new home prices rose the most in four months, as smaller developers marketed more projects amid interest from buyers concerned that prices will start rising again.
Prices climbed for a sixth consecutive month, increasing 0.26 percent to 8,791 yuan (US$1,412) per square meter last month from October, said SouFun Holdings Ltd (搜房控股), China’s biggest real-estate Web site owner, in an e-mailed statement yesterday, based on its survey of 100 cities.
The eastern city of Heze had the biggest gain last month, increasing 1.97 percent, SouFun said. Home prices in Beijing rose 0.7 percent from October and increased 0.1 percent in Shanghai.
“Buyers’ sentiment improved as they saw home sales rise in first-tier cities, which is a leading indicator,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research (聯昌國際證券). “First-home buyers, who have been waiting and watching the market, are begging to take action in case home prices take off nationwide.”