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.
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.