HONG KONG — A closely watched survey of manufacturing-sector activity in China provided the latest indication on Thursday that the world’s second-largest economy appears to have bottomed out after many months of slowing growth.
The early reading of the monthly purchasing managers’ index, compiled by the research firm Markit and released by the British bank HSBC, jumped to 50.1 points in August, from 47.7 in July, and easily beat analyst expectations. The increase, to a four-month high, also took the reading to just above 50 – the level that separates contraction and expansion.
The HSBC P.M.I. for China offers one of the earliest indications each month of how the economy is doing, and Thursday’s reading is likely to solidify expectations that a stabilization that had begun to show in July has continued into August.
It “adds to the number of green shoots indicating a stabilizing economy since July,” Li Wei and Stephen Green, economists at Standard Chartered, wrote in a note, adding that government-led measures aimed at shoring up economic growth, like tax breaks for small businesses and steps aimed at speeding up railway construction, appeared to have begun to take effect.
Future P.M.I. surveys, they said, were likely to “continue to hover between 50 and 53 in the coming months, with no dramatic improvement.”
The Chinese authorities’ approach of targeted economy-bolstering tweaks focused on specific areas contrasts with the big-bang stimulus adopted after the global financial crisis and highlights Beijing’s willingness to accept slower growth as it tries to reduce the economy’s reliance on cheap credit, investments and exports.
After years of double-digit expansion, the economy has now settled into a slower pace of growth, of around 7.5 percent this year. And despite the unexpectedly firm P.M.I. result on Thursday, some analysts said the picture could well cloud over again next year.
Yao Wei, China economist at Société Générale Hong Kong, said that government-driven infrastructure investment should be able in the short term to offset problems like the renminbi’s strength relative to many other emerging Asian currencies, many of which have fallen sharply in recent months. A rebound in the third quarter is “almost certain,” Ms. Yao said.
However, she added, a similar pickup during the fourth quarter of last year, which was also aided by government policy, was short-lived. Given efforts to rein in shadow-banking activities and potential headwinds from abroad as the Federal Reserve scales back its support of the U.S. economy, “we caution that this uptick may not last either.”
Article source: http://www.nytimes.com/2013/08/23/business/global/chinese-manufacturing-sector-unexpectedly-grows.html?partner=rss&emc=rss