China’s manufacturing activity strengthened last month, official figures showed yesterday, the latest data to suggest that the world’s second-largest economy is picking up steam after two quarters of slower growth.
The official purchasing managers’ index (PMI) rose to 51.0 last month from 50.3 in July, according to figures released by the National Bureau of Statistics (NBS).
The index tracks manufacturing activity in China’s factories and workshops and is a closely watched gauge of the health of the economy. A reading below 50 indicates contraction, while anything above signals expansion.
The PMI strengthened for the second straight month and comes as other recent data has spurred optimism a slowdown in the economy may have been stemmed.
The result marked the highest this year and “shows that China’s manufacturing industry as a force for economic development has strengthened to some extent and makes obvious that a return to corporate stability has quickened further,” Zhao Qinghe, a statistician with the NBS, said in a report on the bureau’s Web site.
In July, generally upbeat economic data, including a jump in industrial production to a five-month high, helped spur optimism that China’s economic weakness may have hit bottom.
British banking giant HSBC said last month that the initial reading of its PMI survey for last month came in at 50.1, rebounding from an 11-month low and marking the first time since April the indicator had expanded.
HSBC is due to release its closely watched final PMI index for last month today.
The first half of this year saw a spike in analyst concerns about China’s economy after an expected rebound from the worst growth performance in 13 years failed to materialize.
China’s GDP grew 7.8 percent last year, the weakest result since 1999.
Growth in the first quarter of this year dipped to 7.7 percent from 7.9 percent in the final three months of last year and slowed further to 7.5 percent in the three months through June.
Last month’s PMI figure shows China’s “growth momentum has accelerated thanks to faster implementation of the fiscal program and ‘mini stimulus’ initiated by the new government,” Australia and New Zealand Banking Group (ANZ) bank economists Liu Li-Gang (劉利剛) and Zhou Hao (周浩) said in a report.
Authorities have been loathe to introduce large-scale stimulus measures such as the 4 trillion yuan (US$650 billion) package thrown at the 2008-2009 global financial crisis, but in late July did announce some steps to boost growth, such as reducing taxes on small companies and encouraging railway development.
“The government has allowed extra infrastructure investments, including railway, urban infrastructure construction, and shanty town renovation,” the ANZ report said, adding that would result up to about 200 billion yuan of output, estimated as equal to 0.8 percent of China’s GDP in the first half of this year.
China’s leaders say they are aiming to move the economy away from dependency on big ticket investment and instead want consumer demand to become the key growth engine.
Authorities are targeting growth of 7.5 percent for this year, which is the same as the objective set last year.
They see annual growth in the 7 percent range as being more sustainable for the future as the country’s economy matures. As recently as 2011 GDP grew 9.3 percent and expanded 10.4 percent in 2010.
Chinese President Xi Jinping (習近平) told business leaders in April that China’s days of “ultra-high speed” growth are probably over and that officials would be emphasizing “quality and efficiency” in economic development.