China’s manufacturing activity expanded this month to a six-month high, HSBC said yesterday, a further sign that a rebound in the world’s second-largest economy is gaining momentum on improving demand.
The British banking giant’s preliminary purchasing managers’ index (PMI) for this month hit 51.2, the highest since March when it stood at 51.6, HSBC said in a statement.
The result was higher than last month’s final reading of 50.1, which had improved from an 11-month low of 47.7 in July and ended three months of contraction, according to the bank.
The index tracks manufacturing activity in China’s factories and workshops and is a closely watched gauge of the health of the world’s second-largest economy.
A reading above 50 indicates growth, while anything below signals contraction.
This month’s figure suggested China’s ongoing growth rebound is consolidating on the back of “simultaneous improvements” in overseas and domestic demand, HSBC economist Qu Hongbin (屈宏斌) said in the release.
“We expect a more sustained recovery as the further filtering-through of fine-tuning measures should lift domestic demand,” he said. “This will create more favorable conditions to push forward reforms, which should in turn boost mid- and long-term growth outlooks.”
Bank of America Merrill Lynch economists said that given the strengthening of the rebound, China is expected to achieve this year’s growth target of 7.5 percent, which will likely lead Beijing to tone down its pro-growth rhetoric issued since late June.
“Good data since August means that markets should not expect a big stimulus package,” Bank of America Merrill Lynch economists Lu Ting (陸挺) and Zhi Xiaojia said in a research note, adding that fast-rising home prices are another constraint for continuing policy easing.
However, the government is unlikely to take any aggressive tightening measures either, as growth and financial stability are still “highly valued” for the new leaders ahead of a key Chinese Communist Party meeting scheduled for November, they said.
Chinese authorities have so far been reluctant to introduce large-scale stimulus measures, but in late July did announce some steps to boost growth, such as reducing taxes on small companies.
China’s economy grew 7.7 percent in the first three months of this year and 7.5 percent in the April-June period. Recent data, including strong exports and industrial output, have pointed to renewed strength in the economy.
HSBC said this month’s final PMI reading will be published on Monday next week.