• Wed
  • Dec 24, 2014
  • Updated: 11:29pm

China PMI edges up to 50.3

PUBLISHED : Tuesday, 01 April, 2014, 9:36am
UPDATED : Wednesday, 02 April, 2014, 5:05pm

Manufacturing gauges pointed to weakness in China that could prompt Beijing to roll out additional support measures.

A purchasing managers' index fell to 48 last month, the lowest reading since July last year, from 48.5 in February, HSBC and Markit Economics said yesterday.

A separate PMI from the government, with a larger sample size, was at 50.3 from 50.2.

The reports underscore what Premier Li Keqiang last week called "difficulties and risks" as he tries to control surging debt, default dangers and pollution that threatens to stoke public discontent.

Li said the nation had policies to support growth after the State Council said it would accelerate construction spending.

"We expect Beijing to fine-tune policy sooner rather than later to stabilise growth," said Qu Hongbin, the chief China economist at HSBC in Hong Kong.

Qu also said the pace of first-quarter economic growth was likely to have fallen below the government's full-year target of 7.5 per cent.

While yesterday's official PMI was the lowest for March in figures dating to 2005, a sub-index of new export orders rose to 50.1 from 48.2, indicating the first expansion since November.

The report suggested growth was poised to stabilise, said Zhang Liqun, a researcher at the State Council's Development Research Centre.

The government's PMI is based on survey responses from purchasing executives at 3,000 companies, while the HSBC-Markit report comes from more than 420 enterprises.

Meanwhile, manufacturing in the United States expanded at a faster pace last month as gains in production and orders showed the industry was recovering towards the end of a winter-depressed first quarter.

The Institute for Supply Management's index rose to 53.7 from 53.2 in February, it said yesterday. Readings above 50 indicate growth.

In Europe, growth in manufacturing stayed close to the highest level in almost three years last month, adding to signs the region's recovery is gathering pace.

Markit's euro-zone manufacturing PMI index slipped to 53 from 53.2 February. The index has been above 50 since July.


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Despite widespread opinion to the contrary, we may be going to witness China's coming golden decade (in terms of economic development).
China's consumption-expenditure/GDP ratio is expected to be (much) higher in the coming decade, at least before her demographic cliff is reached in 2025.
Her coming GDP growth rate is further sustained by China's future on-and-on urbanization effort.
It's even better if China enacts a national-income-doubling-plan anytime soon, like Japan's in the beginning of the 1970s.
Who says we can't make reliable long-term economic predictions?
(From 'The Demographic Cliff’ by Harry S. Dent, Jr.)
Now you should know where to put your long-term investment in the coming decade.
Whether the above arguments make sense only time can tell.
Demographic Peaks around the world :-
Japan 1989-1996
South Korea 2010-2018
United States 2003-2007
Germany 2010-2013
United Kingdom 2010-2013
France 2010-2020
Italy 2013-2018
Spain 2025
China 2015-2025
The above table shows when the Spending Wave peaks among major countries and regions around the world.
Now you know why Japan has been a coma economy in the past 15 years.
South Korea may follow the road of Japan after 2018.
It's no coincidence that the recent Great Recession started in the US in 2008.
It doesn't really matter whether there is stimulative policy (negative interest rate, devaluation of the Euro, or even European QE) enacted in Europe --- the double whammy of Euro exchange-rate inflexibility and coming one-country-by-one-country demographic cliffs ensures that most investments in Europe in the coming decade will not be (very) rewarding.
One may argue that China should instead balance her economy toward more domestic consumption and away from exports.
Well, China’s consumption expenditure as a share of GDP (36% in 2012) is probably understated.
Many hidden consumption expenditures are not counted.
Part of the country’s consumption expenditure is disguised as government expenditure and business investment (like utilizing the government’s or company’s cars, and government-or-company-pay-the-bill lunches and dinners).
The subsidization of some of China’s exports also means the replacement of internal demand by external demand.
(Chinese readers: ****kejingmin.blog.caixin.com/archives/69410)
The foreign reserves thus accumulated by China should be partly used to buy back foreign products to be consumed by the Chinese residents --- money is just a medium of exchange, but for some reasons this royal road isn’t used.
Unlike the 19th-century European industrialized countries, nowadays China can’t practise imperialism and colonize other countries to enlarge her exports market and help utilize her excess capacity.
Instead, to utilize China’s excess capacity, maintain the employment level, and sustain the GDP growth rate, the Chinese government can increase her exports of armaments to the EM countries.
High-speed trains and ultra-high-voltage electricity network can also be exported by China.
The coming Asian Infrastructure Investment Bank can help finance the countries who want to import the above technologies.
Besides the difficulty of obtaining the credits they need even at very high borrowing costs in the shadow banking market, China's SMEs also face the following problems:
a perhaps-too-high (overvalued) yuan exchange rate,
a perhaps-too-high real-wage-rate/worker-productivity ratio (recently, China's minimum wage rate is raised once again),
can't hire all the workers they want in some places (yet to develop more capital-intensive or high-tech way of manufacturing),
and the fact that now China exports more to the EM countries than to the developed countries.
The recent EM turmoil is caused both by the US's QE tapering and by China's weakening economy (due perhaps to a tighter monetary policy after the 4-trillion-yuan investment binge).
Weaker EM economies means less demand for China's exports, a slower-growing Chinese economy, less Chinese demand for EM countries' exports (raw materials and energy products), and weaker EM economies --- a vicious circle.
To add insult to injury, the recent massive EM currency depreciation relative to the US dollar means that China's exports to her biggest export markets (the EM countries) become much more expensive than before, thereby hurting further China's SMEs.
In principle, China's yuan should now fall (much) further relative to the US dollar than is the case now, to retain (not increase!) her export competitiveness (particularly in the EM countries) and hence to help maintain her GDP growth target this year.
The discrepancy between the performance of the official and HSBC indexes may indicate the traditional fact that the bigger SOEs still enjoy a competitive advantage relative to the SMEs,
in the form of ready availability of cheaper credit from the policy banks,
their greater ability to grab the loans they need in the shadow banking market (perhaps at all costs),
and their greater easiness in obtaining cheaper foreign loans from Hong Kong and other places.
This year, the official March PMI index increases only by 0.1 percentage point relative to the February index of 50.2, compared with last year’s increase of 0.8%.
The increase is even more paltry compared with the average March/February PMI index increase of 3.1 percentage points since 2005.
It’s hard to conclude the weakening Chinese economy has just stabilized.
This is more so when we consider also the HSBC March PMI manufacturing index of only 48.0.
China may need to enact some expansionary fiscal policies in the foreseeable future to maintain her GDP growth.
(Chinese readers: ****cn.reuters.com/article/CNAnalysesNews/idCNCNEA3005L20140401?sp=true)


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