China PMI shows ex­pan­sion in pos­i­tive sign


China’s man­u­fac­tur­ing ac­tiv­ity ex­panded in March for the first time since De­cem­ber, the gov­ern­ment said Wed­nes­day, a bright spot as the world’s sec­ond-largest econ­omy fights a broad slow­down in growth.

The of­fi­cial Pur­chas­ing Man­agers’ In­dex (PMI) re­leased by the Na­tional Bureau of Statis­tics (NBS) came in at 50.1 last month, up from 49.9 in Fe­bru­ary and the first re­sult show­ing ex­pan­sion since a sim­i­lar 50.1 in De­cem­ber.

The in­dex, which tracks ac­tiv­ity in fac­to­ries and work­shops, is con­sid­ered a key in­di­ca­tor of the health of China’s econ­omy, a ma­jor driver of global growth. A fig­ure above 50 sig­nals growth, while any­thing be­low in­di­cates shrink­age.

The data sur­prised econ­o­mists, who at­trib­uted the im­prove­ment to of­fi­cial ef­forts to boost the weak­en­ing econ­omy.

In­vestors cheered the re­sult, send­ing the bench­mark Shang­hai Com­pos­ite In­dex up 1.66 per­cent to 3,810.29, its high­est close in seven years.

The of­fi­cial PMI con­tracted in Jan­uary for the first time in more than two years, rais­ing alarm bells for China’s growth out­look.

China’s econ­omy ex­panded 7.4 per­cent in 2014, mark­ing a 24-year low. The slow­down has prompted au­thor­i­ties to loosen mon­e­tary pol­icy in a bid to stim­u­late growth.

The gov­ern­ment last month set its an­nual tar­get for gross do­mes­tic prod­uct (GDP) ex­pan­sion at about 7.0 per­cent, down from its aim of ap­prox­i­mately 7.5 per­cent in 2014.

The cen­tral Peo­ple’s Bank of China (PBoC) has cut bench­mark in­ter­est rates twice since Novem­ber and has also low­ered the amount of funds banks must keep on hand to boost lend­ing and spark eco­nomic ac­tiv­ity.

‘Job shed­ding’

A closely watched pri­vate PMI sur­vey showed con­flict­ing re­sults on Wed­nes­day, with UK bank HSBC’s fi­nal PMI read­ing for March com­ing in at 49.6, be­low breakeven, but bet­ter than a pre­lim­i­nary read­ing of 49.2 re­leased last week.

The in­dex, com­piled by in­for­ma­tion ser­vices provider Markit, fell from 50.7 in Fe­bru­ary and has now shown con­trac­tion for three of the past four months.

Markit econ­o­mist Annabel Fid­des said the re­sult showed out­put growth was suf­fer­ing as slack do­mes­tic and for­eign de­mand weighed on mar­ket con­di­tions.

“Com­pany down­siz­ing poli­cies con­trib­uted to a fur­ther decline in man­u­fac­tur­ing em­ploy­ment, with the pace of job shed­ding the strong­est since last sum­mer,” she added in a re­lease ac­com­pa­ny­ing the re­sults.

China’s lead­er­ship is seek­ing a man­aged slow­down in GDP growth to more sus­tain­able, con­sumer-spend­ing driven ex­pan­sion, as in other ma­jor economies such as the United States.

Too steep a de­cel­er­a­tion, how­ever, could cost jobs and sow dis­con­tent, a key con­cern of the rul­ing Com­mu­nist Party, which places prime em­pha­sis on so­cial sta­bil­ity.

Be­sides the in­ter­est rate and other cuts, the cen­tral bank on Mon­day low­ered min­i­mum down pay­ment lev­els on sec­ond homes na­tion­wide in a bid to boost the slump­ing prop­erty mar­ket.

The move sug­gests that “the gov­ern­ment will roll out fur­ther sup­port­ive poli­cies to pre­vent growth from drop­ping be­low 7.0 per­cent,” ANZ econ­o­mists Liu Li­Gang and Louis Lam said in a note.

De­clines in Chi­nese new home prices slowed in March from the pre­vi­ous month, a pri­vate sur­vey showed Tues­day.

The av­er­age price of a new home in China’s 100 ma­jor cities edged down 0.15 per­cent from Fe­bru­ary, the China In­dex Academy (CIA) an­nounced, bet­ter than a drop of 0.24 per­cent in Fe­bru­ary.

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