China manufacturing picks up in June in good news for economy

The private Caixin/Markit purchasing managers’ survey shows a pickup in new orders, giving government room to pursue regulatory tightening

PUBLISHED : Monday, 03 July, 2017, 11:43am
UPDATED : Monday, 03 July, 2017, 10:56pm

A private gauge of sentiment in China’s manufacturing industries exceeded estimates in June, adding to evidence that the economy is maintaining some momentum after a strong start to the year.

The Caixin Media and Markit Economics manufacturing purchasing managers’ index rose to 50.4 from 49.6 in May, which had been the first time the index had slipped below 50 since June 2016. Output increased to 50.6 from 50.2 in May while new orders also rose. Numbers higher than 50 indicate expansionary conditions, while below 50 signals contraction.

“Economic activity in China has yet to be really affected by liquidity and also supervisory tightening,” Donna Kwok, senior China economist at UBS Group AG in Hong Kong, said in a Bloomberg Television interview.

“Even though investment in the economy is softening somewhat, we’re getting enough of a counterbalance to offset that, and as a result the government has more room still to continue with that supervisory tightening,” Kwok said.

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The measure, which relies on a smaller sample size, compares with the official government PMI released on June 30 that rose to 51.7 in June, beating all economist estimates in a Bloomberg survey. The official report signalled that robust global trade is aiding Chinese momentum, giving policymakers extra room to tackle the build-up of financial risks.

“Operating conditions have now strengthened in nine of the 10 past months, though the latest improvement was only slight,” Caixin and Markit said in a statement.

“Helping to lift the headline PMI was faster growth in new order books. Though only marginal, the latest increase in new orders was the quickest seen for three months,” the statement said.