Chinas official manufacturing PMI, released over the
weekend, improved for the fourth month in a row to 50.6 in
November from Octobers 50.2. The index missed
expectations of 50.8 in a Bloomberg poll of analysts but still
cheered markets up as it was the highest figure in 7
The figure added to expectations that China will
achieve its economic target of 7.5% this year. It adds to the
ever increasing evidence that China has bottomed aided by
infrastructure led stimulus, Eimear Daly, foreign
exchange market analyst at Monex Europe, said.
The encouraging news has determined some economists to
predict that growth rates of 8% are attainable either in the
fourth quarter or in the first quarter of next year.
Last month, the flash HSBC PMI hit a
But the official PMI shows there are signs of weakness in
the data still, according to Wei Yao, Asia Pacific analyst at
First, she noted, the unemployment sub-index deteriorated
further, hitting the lowest level in 10 months. Second, the
restocking process seems to be painfully sluggish
and third, pressure on corporate margins because of excess
capacity and high inventories hasnt gone away
Overall, the Chinese economy is on the mend gradually,
but the excess capacity issue is likely to remain a major
challenge for manufacturers, Yao said.
Among the strong points of the Chinese official
manufacturing PMI Flemming Nielsen, an analyst with Danske
Bank, noted the improvement in the new orders component to 51.2
from 50.4 and export orders expanding to 50.2 from
The continued improvement in Chinas
manufacturing PMIs is consistent with our view that the Chinese
economy has bottomed out and has started to recover
moderately, said Nielsen.
He expects Chinas GDP to advance at a rate of 7.8% in
the fourth quarter and by 8.3% in the first quarter of next
Another measure of the health of Chinas factories, the
final HSBC manufacturing PMI, recorded the first improvement of
operating conditions in 13 months, coming in at 50.5 in
November from Octobers 49.5.
The rate of expansion was only modest, but the quickest
since October 2011, Markit said in a statement detailing
It said new orders rose for the second month in a row,
albeit at a weaker pace, new export orders increased for the
first time since April, backlogs of work continued to fall and
the rate of job shedding was only slight.
This confirms that the Chinese economy continues to
recover gradually, said HSBC chief economist for China
Hongbin Qu in the press release.
We expect GDP growth to rebound modestly to around 8%
in the fourth quarter as the easing measures continue to filter
But the road to recovery is not that clear, with some
analysts pointing out that the PMIs paint a mixed picture.
Mark Williams, chief Asia economist at Capital Economics,
said that smaller firms reported that conditions were the
weakest in 6 months, and this showed that the recovery
The breakdown by company size shows that recent improvements
have been driven almost entirely by large firms,
according to Williams.
Medium-sized firms have seen no meaningful improvement
while the sub-index for small firms fell last month to 46.1,
the lowest since May, he said.
This fits the view that recovery is being driven by
spending on infrastructure, which tends to benefit large