China manufacturing index expands

Beijing, May 1

China’s economic recovery stabilised in April, an official factory activity gauge showed today, as the property market recovered and credit grew.

The Purchasing Manager’s Index (PMI), tracking activity in factories and workshops, rose for the second successive month, the National Bureau of Statistics (NBS) said.

The figure was 50.1 compared to 50.2 in March. But any reading above 50 signals expanding activity, while anything below indicates shrinkage.

Investors watch the figure closely as the first available indicator each month of the health of the world’s second biggest economy.

PMI for the non-manufacturing sector fell to 53.5 in April, down from 53.8 in March. The figure tracks activity in the service and construction industry.

The manufacturing PMI in March showed the first expansion for nine months. Today’s figures show that the March rebound was not just a surge after the Lunar New Year.

Analysts said the firm reading in April bolsters the case for restraint in any extra stimulus to avoid fuelling housing prices or flooding over-capacity sectors with cheap credit.

“This is a managed stabilisation,” Zhou Hao, a Singapore-based economist at Commerzbank AG, told Bloomberg News.

“The Chinese government only rolls out some short-term stimulus when the data are at the worst. It doesn’t want to see all the steel mills firing up again or the market’s speculation momentum gets too strong.”

The key manufacturing sector has been struggling for months in the face of sagging global demand for Chinese products.

“As investment recovered, the property market turned around and infrastructure construction speeded up, and the expansion of the manufacturing sector continues,” the NBS said in a statement.

The PMI number signalled ‘slight improvement in growth momentum’, Nomura said in a note, but the firm said it expected it would be ‘short-lived’.

Beijing has been trying to retool its economy to encourage domestic consumption, and move away from infrastructure investment and exports as the main drivers of growth.

But the transition is proving bumpy and the growth slowdown has alarmed investors worldwide.

China’s economy, a vital driver of global expansion, grew 6.9 per cent last year, its weakest rate in a quarter of a century.