China Economy

China economy

China’s Caixin PMI falls below 50 for the first time since June 2016

PUBLISHED : Thursday, 01 June, 2017, 11:10am
UPDATED : Thursday, 01 June, 2017, 11:10am

A private gauge of China’s manufacturing fell back into contractionary territory in May, adding to recent evidence that the economy’s strong start to 2017 is levelling off.

Caixin Media and Markit Economics manufacturing purchasing managers’ index fell to 49.6 from 50.3 in April, the lowest reading since June 2016 Output fell to 50.2 vs 51 in April

The private measure -- with a smaller sample size -- contrasts with the government’s PMI reading released Wednesday, which showed the manufacturing PMI was steady last month.

The official report also suggested China’s factory recovery was spreading to the smaller and nimbler private sector as price pressures on them abate.

China’s policy makers are walking a tight rope, seeking to rein in excessive leverage in parts of the financial system while ensuring there’s enough credit flowing to the real economy to keep growth humming.

“We should not underestimate the senior leadership’s desire to contain financial leverage and risk, efforts on which have only just begun, even if it may lead to slower credit and economic growth,” economists led by Hong Kong-based Wang Tao wrote in a report. “However, given the need to meet other government priorities, most notably growth stability, we expect the government to constantly adjust the pace and magnitude of its supervisory tightening to strike a delicate balance.”