July 4, 2020

Chinese Factories Appear to Be Stabilizing

HONG KONG — Two surveys that take the temperature of China’s giant manufacturing sector showed an economy that appears to have stabilized for now but that is still struggling to recover some of the momentum it lost at the start of the year.

The two purchasing managers’ indexes — one published by the Chinese statistics bureau on Saturday, the other released by the British bank HSBC on Monday — painted somewhat divergent pictures for May, though both underlined the fact that the factory sector is still struggling with lackluster demand.

The official survey, which is more focused on large and midsize state-owned companies of the kind that benefit from state-led investment, provided a positive surprise by edging up slightly, to 50.8 in May, from 50.6 in April. Economists polled by Reuters had expected the index to slip toward the 50-point level, with figures above indicating expansion and those under showing contraction.

On the other hand, the final version of the HSBC index for May, compiled by the research firm Markit and released Monday, came in at 49.2 points. The reading was a downward revision from the preliminary number of 49.6, which had been published on May 23, and showed conditions at their weakest in eight months. The HSBC gauge is more focused on smaller companies, which have benefited less than their larger counterparts from the recent credit expansion, HSBC said in a research note.

“Overall conditions for China’s manufacturing sector were at best stabilizing at a relatively low level in May,” HSBC economists said, adding that a batch of official economic data for May, to be released this coming weekend, could provide more clarity on China’s growth outlook. “Beijing policy makers continue to face a tough challenge in striking an appropriate balance between the need to push through structural reforms versus the need to preserve near-term growth,” they said.

After years of double-digit expansion, China’s pace of growth has cooled in recent years — a slowdown that has in part been deliberately engineered by the authorities in Beijing as they try to ease a potentially worrisome flood of lending, forestall asset price bubbles and direct the economy toward higher-quality expansion.

Beijing is targeting 7.5 percent growth this year, a rapid clip compared with the rates of expansion of other leading economies but a significantly slower pace than the 9.3 percent growth in 2011 and the 10.4 percent in 2010.

“While the data may ease some concerns of rapid deteriorating of the Chinese economy, the impact may be short-lived,” economists at Australia New Zealand Banking in Hong Kong said in a research note on the official purchasing managers’ index, adding that structural reforms were needed to help sustain growth prospects.

Article source: http://www.nytimes.com/2013/06/04/business/global/chinese-factories-appear-to-be-stabilizing.html?partner=rss&emc=rss

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