After China’s long slump, economy rebounding well
China’s official manufacturing index rose to the highest level in seven months as new orders and export demand climbed, underscoring optimism the economy is recovering after a seven-quarter slowdown.
The Purchasing Managers’ Index was 50.6 in November, officials said in Beijing.
That compares with the 50.8 median estimate in a Bloomberg News survey of 28 analysts and 50.2 the previous month. A reading above 50 indicates expansion.
The report reduces pressure on China’s new leadership to roll out more policies to support a growth rebound as they push ahead with overhauling state-owned enterprises and boosting consumption. Confidence in China’s economy is at the highest in more than a year amid faith that Xi Jinping’s administration will improve the investment climate, a Bloomberg investor poll last week showed.
“It’s especially encouraging that the rise in the PMI was mainly driven by new orders, which suggests output will be further boosted in coming months,” said Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong. “Beijing will maintain the current policy stance, which is featured as marginally pro-growth without bigbang stimulus.”
Lu said he expects no cut in interest rates and at most one reduction in banks’ reserve requirement ratio before the end of the year. He estimates economic growth will accelerate to 7.8 per cent in the fourth quarter from a year earlier after a 7.4 per cent pace in the previous three months, which was the slowest in three years.
The yuan had its fourth monthly gain, its longest winning streak in more than a year, on signs economic growth is recovering. The currency climbed 0.2 per cent in November to 6.2267 per (U.S.) dollar in Shanghai and on Nov. 27 reached the highest level since China unified official and market exchange rates in 1993.
The federation’s PMI is based on responses from purchasing manag- ers at 820 companies in 31 industries. The report showed a gauge of new orders expanded for a second month to its highest level since April after contracting for the previous five months, while the output sub-index was the highest in six months at 52.5. A measure of export orders rose above 50 for the first time since May, with gains boosted by Christmas demand, the federation said in a separate statement. “Economic growth will continue to maintain a moderate rebound,” Zhang Liqun, a senior researcher at the Development Research Center of the State Council, said in a media release. The data “indicate that destocking is now shifting to restocking, which means industrial production will continue to ramp up.” China’s gross domestic product may expand 7.7 per cent in the fourth quarter from a year earlier, the first acceleration in eight quarters, according to the median estimate of 29 analysts in a Bloomberg survey.