China factory activity accelerated in December: Caixin
BEIJING: Chinese factory activity accelerated in December, according to independent data released yesterday, a positive indicator for the world’s second-largest economy to kick off the new year.
The Caixin Purchasing Managers Index (PMI) — an indicator of conditions at small manufacturers-rose to 51.5 in December, up from 50.8 in November and the highest reading since August.
The official PMI indicator of 51.6 for December was released on Sunday by China’s National Bureau of Statistics and showed a slight deceleration from November, although it largely maintained momentum. A PMI figure above 50 represents growth while anything below points to contraction.
Caixin’s index focuses on economic activity at small and medium sized enterprises, and its continued strength may reflect the resilient global demand for many of these exporting firms.
China’s exports saw solid growth during the final months of last year. “Manufacturing production continued to increase across China at the end of 2017” Caixin said in a statement with data compiler IHS Markit. “Manufacturing operating conditions improved in December, reinforcing the notion that economic growth has stabilised in 2017 and has even performed better than expected” Caixin analyst Zhengsheng Zhong wrote. “We should not underestimate downward pressure on growth next year due to tightening monetary policy and strengthening oversight on local government financing.” Caixin said firms used existing inventories of finished items to satisfy some new orders and cut slightly their inventories of finished goods.
Meanwhile, China’s central bank lifted its official yuan midpoint to the highest level in nearly four months to 6.5079 per dollar yesterday, reflecting broad dollar weakness and solid spot yuan performance in the previous trading day.
Tuesday’s official midpoint was 263 pips or 0.4 percent firmer than the previous fix of 6.5342 on Friday and was the strongest since Sept. 11. The dollar fell to its lowest in over three months against a basket of major currencies on Friday, marking its steepest annual drop since 2003.
The Chinese yuan registered a rise of around 6.8 percent against the greenback in 2017, recovering from a roughly 6.5 percent loss a year earlier and reversing three straight years of depreciation.