China’s official factory gauge maintained momentum, signaling campaigns to reduce pollution and debt risk have not curbed output.
The manufacturing purchasing managers index (PMI) edged down to 51.6 last month, in line with the forecast in Bloomberg’s survey of economists, from 51.8 in November.
The non-manufacturing PMI stood at 55, compared with a projected 54.7 reading and 54.8 in November last year, the Chinese National Bureau of Statistics (NBS) said on Sunday.
Numbers above 50 indicate improving conditions while those below signal deterioration.
Steadiness in manufacturing comes even amid intensifying efforts to curb smog and a push to reduce excessive borrowing. Top leaders have been signaling less emphasis on pursuing expansion at all costs and this month, at their main economic planning conclave this year, they pledged to focus on “critical battles” against financial risk, pollution and poverty.
“The relatively healthy PMI number shows the government can still tolerate the impact of deleveraging,” said Ding Shuang, chief China economist at Standard Chartered PLC in Hong Kong. “The PMI decline reflects the impact of financial deleveraging and property curbs on the economy. Deleveraging has pushed up interest rates and slowed credit growth.”
“Growth momentum still seems to be steady and thereby monetary policy will continue to stay put,” said Larry Hu, chief China economist at Macquarie Securities Ltd in Hong Kong. “We see the risk in 2018 biasing toward the downside, especially from the infrastructure spending side, due to the government’s push on deleveraging.”
“The drop in PMI is probably due to the credit tightening toward the end of the year,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. “The trend of economic slowdown may become more and more obvious, but the economy’s quality may be improved.”
“The moderate decline in headline PMI was mainly attributable to the lower inventory, while production growth remained solid,” China International Capital Corp analyst Liu Wenqi wrote in a report.
“Manufacturing PMI indicated continued strength in the cyclical recovery. Looking forward, there may be more room for restocking demand if the economic growth came in higher than the market expected at the beginning of 2018,” Wenqi said.
The trend of economic stability is expected to be extended, the NBS said in a statement, adding that market demand recovered and industrial restructuring accelerated, leading to shortage of energy and raw materials.
The PMI surveys show companies are confident about economic development, the China Federation of Logistics and Purchasing said in a statement on Sunday.
The agency, which jointly releases PMI with the NBS, said it projects economic growth of about 6.5 percent this year.
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