China’s manufacturing activity expanded last month for a third straight month, official data showed yesterday, adding to signs the world’s No. 2 economy is emerging from a prolonged downtrend.
The official purchasing managers’ index (PMI) stood at 50.6 last month, unchanged from the previous month, according to the China Federation of Logistics and Purchasing and the National Bureau of Statistics (NBS).
The PMI is a widely watched barometer of the health of China’s economy, with a reading above 50 indicating expansion, while anything below points to contraction. October’s reading was 50.2, after two months in negative territory.
The data came a day after banking giant HSBC’s own PMI survey reached a 19-month high of 51.5, from 50.5 in November.
Bank of America Merrill Lynch economists Lu Ting (陸挺) and Hu Weijun (胡偉俊) questioned whether the official PMI data may have been slightly massaged.
“PMI data are heavily seasonally adjusted, especially during the year ends and beginnings,” they wrote in a research note. “It’s likely that the NBS statisticians intentionally reported a conservative estimate within the allowable range to save better data for rainy days.”
Questions about the transparency of Chinese economic data have been around for years, reflecting the closed nature of the country’s Chinese Communist Party-led ruling structure.
However, Lu and Hu also said the official PMI was weighed down by a decline in export orders.
“It suggests that domestic demand was still the main driver for growth,” they wrote, adding “the Chinese government will continue its pro-growth policy stance at the moment to withstand weak external demand.”
HSBC’s PMI survey announced on Monday also showed new export orders declining slightly from November.
Zhang Liqun (張立群), an analyst with the China Federation of Logistics and Purchasing, said in a release that the official PMI’s failure to increase from November “shows the momentum of the pick-up in the economy is relatively weak.”
Overall, however, he said the situation appears under control.
“The Chinese economy is currently in transition toward stable growth of between 7 to 8 percent,” Zhang said.
Beijing is expected to release GDP data for the past three months later this month. Growth has fallen for seven straight quarters and hit a more than three-year low of 7.4 percent in the three months to September.