China's economy finds firmer ground as pace picks up
Services and manufacturing sectors show healthier signs as surveys indicate the downturn may be stabilising, bolstering hopes for reforms
Bloomberg in Beijing
The mainland's economic slowdown may be stabilising after official manufacturing and services surveys showed faster expansion and gauges of business expectations rose.
The non-manufacturing Purchasing Managers' Index showed the first acceleration since March, government data released at the weekend showed, following an unexpected gain in a manufacturing PMI last week. A services index from HSBC and Markit Economics was unchanged last month, a separate report showed yesterday.
The reports may bolster confidence that Premier Li Keqiang's policies are helping prevent a deeper slowdown in growth, allowing him to pursue reforms that will secure more sustainable longer-term expansion. The economic-planning agency said on Sunday that the construction of transport-related infrastructure projects would be accelerated, adding to efforts to boost domestic demand that have included tax-system changes and help for small companies.
"The PMI is supposed to be a leading indicator, so we are witnessing a stabilisation and a sign the economy isn't slowing down at a faster rate," said Steve Wang, Hong Kong-based chief China economist with Reorient Financial Markets. "A lot of economy-boosting measures have been put in place since the beginning of the year and there's a time lag for those to kick in, so we should see a bit of a rebound in the fourth quarter."
The mainland economy grew 7.5 per cent from a year earlier in the April-June period, slowing for a second quarter and extending the longest streak of sub-8 per cent expansion in at least two decades. Wang says he expects second-half growth of 7.6 per cent, the same as the pace in the first six months.
The government set an expansion target of 7.5 per cent for this year after gross domestic product rose 7.8 per cent last year, the least since 1999. The country's potential growth rate had fallen to a range of 7 per cent to 8 per cent, the State Council Information Office said last week, pledging not to allow economic growth to decelerate outside a "reasonable zone".
The State Council has indicated it will refrain from implementing a stimulus package of the scale unleashed during the 2008 global crisis. Instead, it has issued targeted policies including tax breaks, support for infrastructure investment and for small companies while curbing industrial overcapacity and reining in financial risks to aid economic restructuring.
The National Development and Reform Commission said on Sunday that 10 transport-related projects should begin in the second half of the year and work on a new airport for Beijing may start early.