Man­u­fac­tur­ing up again

China Daily (Hong Kong) - - COMMENT -

AL­THOUGH THERE WAS A SLIGHT PICK-UP IN China’s of­fi­cial Pur­chas­ing Man­agers’ In­dex for July, it does not sig­nal the econ­omy is out of the woods yet.

The in­dex, which tracks large en­ter­prises in the main­land, rose to 50.3 from 50.1 in June. But a cloudy out­look re­mains, es­pe­cially con­sid­er­ing the di­ver­gent read­ing of the HSBC PMI,

mainly tracks small en­ter­prises, fell to 47.7 in July from 48.2 in June. A PMI read­ing of more than 50 in­di­cates the ex­pan­sion of man­u­fac­tur­ing ac­tiv­i­ties, while a read­ing of less than 50 in­di­cates con­trac­tion.

The eco­nomic prospects have cer­tainly im­proved as China has un­veiled a se­ries of mini-stim­u­lus mea­sures in the past weeks fol­low­ing GDP growth of 7.5 per­cent year-on-year in the sec­ond quar­ter.

The govern­ment is boost­ing spend­ing in so­cial hous­ing, ur­ban in­fra­struc­ture, high-speed rail lines and en­ergy-sav­ing in­dus­tries. Mean­while, it has of­fered tax breaks to the 6 mil­lion small com­pa­nies na­tion­wide and fur­ther ex­panded the pilot pro­gram to re­place the sales tax of en­ter­prises with val­ueadded tax in the trans­porta­tion and some ter­tiary in­dus­tries, which will re­duce tax bur­dens for a large num­ber of en­ter­prises na­tion­wide. As their sup­port­ive ef­fect grad­u­ally ma­te­ri­al­izes, th­ese mea­sures will bol­ster the econ­omy.

The de­cline of the coun­try’s year-on-year GDP growth in the sec­ond quar­ter com­pared with the pre­vi­ous two quar­ters, has trig­gered con­cerns at home and abroad, lead­ing to the of­fi­cial em­pha­sis last month for a steady and healthy growth.

The slight rise in the of­fi­cial PMI for July is a re­flec­tion of im­proved mar­ket sen­ti­ment as a re­sult of those mea­sures.

Still, the PMI rise re­mains weak given the frag­ile do­mes­tic and in­ter­na­tional eco­nomic sit­u­a­tion.

So when mon­i­tor­ing the ef­fect of its tar­geted stim­u­lus mea­sures, the au­thor­i­ties should pay spe­cial at­ten­tion to the predica­ment of the coun­try’s small en­ter­prises, es­pe­cially in the trade sec­tor.

The HSBC PMI read­ing, which is based on sur­veys of mainly small en­ter­prises in the trade sec­tor, high­lights the dif­fi­cult sit­u­a­tion fac­ing those com­pa­nies, as de­mand from ex­ter­nal mar­kets has re­mained weak for months.

Small en­ter­prises are the main source of jobs, so they de­serve spe­cial at­ten­tion from pol­i­cy­mak­ers.

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