China PMI

Thought to start this to update since its a regular monthly thing I am watching and don't want to be posting multiple thread every month...

http://www.cnbc.com/id/101517748

China factory activity contracts further in March: HSBC flash PMI

China's manufacturing activity contracted for a third straight month in March, a private survey showed on Monday.

The flash Markit/HSBC Purchasing Managers' Index (PMI) came in at 48.1, compared with a final reading of 48.5 in February, staying below the 50-mark that divides contraction from expansion in the sector.

The Australian dollar fell 0.3 U.S. cents to 0.9054 after hitting an intraday high of 91 U.S. cents earlier in the session. Asian stock markets showed little reaction with the Shanghai Composite 0.1 percent higher, while Japan's Nikkei led gains by 1.4 percent.

"I think it's a sign that the economy really is contracting, activities are slowing. I think first quarter GDP [gross domestic product] could be on the low side of 7 percent," Alistair Chan, an economist at Moody's Analytics told CNBC, attributing the slowdown to a tightening by the central bank up until June last year.

China's interbank rates, which soared above 10 percent in June last year on concerns of a credit squeeze, have been closely monitored by markets for signs of liquidity strains.

"I think this slowdown is a buildup from that tightening. The loosening in the second half of last year has yet to flow through, so if you look at the stimulus that took place in July, in the form of the increase in bank lending last year, and the recent depreciation of yuan has yet to flow through to the economy," Chan added.

Concerns are growing over the health of the world's second biggest economy following a recent slew of disappointing data, sparking talk that the Beijing will step in soon to stimulate the economy.

Vice Finance Minister Zhu Guangyao told CNBC in an exclusive interview over the weekend that authorities would take a cautious approach towards stimulating the economy.

"We don't want to repeat some mistakes before [that] we've made," said Zhu, adding that in the past China had stimulated "too much" and this had hindered sustainable economic growth.

Rob Aspin, head of equity investment strategy at Standard Chartered Bank Wealth Management Group, said the HSBC PMI data affirmed his projections of slower growth in China, which he expects to weaken even further in the coming years.

"We are expecting growth [in 2014] to be around 7.4 percent, the lower side of the range [that Beijing's] given. We're also anticipating growth to weaken to around 7 percent in 2015 and 2016," he said.

(Read more: Will China's slowdown benefit the rest of the world?)

"This is a very large economy and for China to grow at a 7 percent range is pretty difficult going forward," Aspin added.

China's official growth target for 2014 is 7.5 percent.

Isn't it technically wrong to say that economy is contracting unless real GDP growth is negative?

(24-03-2014, 11:46 PM)GPD Wrote: Isn't it technically wrong to say that economy is contracting unless real GDP growth is negative?

Under the context of China as a "world factory", the contraction in factory activities, is a reliable sign of its economic condition, IMO

(25-03-2014, 02:40 PM)CityFarmer Wrote:

(24-03-2014, 11:46 PM)GPD Wrote: Isn't it technically wrong to say that economy is contracting unless real GDP growth is negative?

Under the context of China as a "world factory", the contraction in factory activities, is a reliable sign of its economic condition, IMO

Despite this important downward trend in manufacturing, which also means global appetite for manufactured goods has decreased, no one seems to be concerned at all, everyone expecting the PBOC to react with stimulus.

Or maybe waiting till PMI reaches 45 before hitting the panic button. It will be interesting to see what happens.

(25-03-2014, 10:51 PM)BlueKelah Wrote:

(25-03-2014, 02:40 PM)CityFarmer Wrote:

(24-03-2014, 11:46 PM)GPD Wrote: Isn't it technically wrong to say that economy is contracting unless real GDP growth is negative?

Under the context of China as a "world factory", the contraction in factory activities, is a reliable sign of its economic condition, IMO

Despite this important downward trend in manufacturing, which also means global appetite for manufactured goods has decreased, no one seems to be concerned at all, everyone expecting the PBOC to react with stimulus.

Or maybe waiting till PMI reaches 45 before hitting the panic button. It will be interesting to see what happens.

I am sure the China authorities are concern. The contraction of manufacturing, might be part of the expected result of the recent China economic reform.

Beijing set for target without stimulus: Li

SCOTT MURDOCH THE AUSTRALIAN APRIL 11, 2014 12:00AM

CHINESE Premier Li Keqiang has ruled out a major fiscal stimulus program to cover short-term economic volatility, despite the nation recording a dramatic trade slump.

In a speech to the Boao Forum for Asia, Mr Li said China was performing well compared with the rest of the world, and was on track to achieve its 7.5 per cent official growth target this year.

China’s economy, the second-largest in the world, grew by 7.7 per cent last year but the expansion rate was the slowest in 14 years.

A growing number of economists believe China could miss its growth target this year, which would be the first time in 25 years that the objective was not met.

Last week, the government delivered a mini-stimulus to some parts of the economy to maintain growth, with tax cuts to small and medium-sized enterprises and increased railway investment.

However, Mr Li ruled out a broader stimulus package.

“We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures,” he said. “We will instead focus more on healthy development in the medium to long-term.

“We have set our annual economic growth target at about 7.5 per cent. As it is an approximate figure, it means there will be fluctuations.”

In the speech to the influential forum, Mr Li said China could survive growth of less than 7.5 per cent but the government was committed to reaching the target.

“It does not matter that economic growth is a little bit higher than 7.5 per cent, or a little bit lower,’’ he said. “As long as we can ensure relatively sufficient employment and do not have relatively big fluctuations, then economic growth will still be in a reasonable range.”

Mr Li said that despite signs of an economic slowdown, he believed the nation was well placed and performing solidly.

“With all the principles established and policy options at our disposal, we can handle all possible risks and challenges,’’ he said. “China’s development has strong resilience.”

Financial markets were surprised yesterday after the Nat­ion­al Bureau of Customs revealed that March exports had dropped by 6.6 per cent, year on year, which was much worse than expected.

The majority of economists had forecast an increase of at least 4.4 per cent. Imports were down 11.4 per cent on a year earlier, compared with a projected 2.8 per cent increase.

The sudden decline was blamed on the People’s Bank of China tightening financing, reducing the amount of credit available in the economy.

ANZ’s chief China economist Liu Li-Gang said that the weak trade performance could also be blamed on the renminbi’s recent depreciation against the US dolla­r.

“The RMB’s depreciation will be short-lived if there is no fundamental change to the one-way capital flows that are under way, especially when China still has a very sizeable current account surplus,” he said.

China's dragging economy is a reflection of the refocusing of investment led to that of consumption driven service based economy. Even then, IMHO with Chinese's good habits of being thrifty, the marginal propensity to spend will be substantially lower than that of Western culture and hence the drag will go on for a long time.

HSBC final PMI for April is 48.1, marginally up from March’s 48

SCOTT MURDOCH THE AUSTRALIAN MAY 05, 2014 1:41PM
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CHINA’S powerful manufacturing sector is showing renewed signs of weakness, indicating that economic conditions across the country remain fragile.

The HSBC final Purchasing Managers Index (PMI) came in at 48.1 in April, down from an initial ‘flash reading’ of 48.3.

The result was up marginally from 48 in March but a reading below 50 shows that the manufacturing sector, which is one of China’s largest employers, remains in contraction.

An official PMI index from the National Bureau of Statistics (NBS) came in at 50.4, but the HSBC survey is considered more reliable. The NBS index surveys mainly state-owned enterprises which are renowned in China for inflating their results.

HSBC chief China economist Qu Hongbin said the bank’s survey also showed that employers cut jobs during March for the sixth consecutive month and future purchase orders were still in decline.

“The latest data implies that domestic demand contracted at a slower pace but remained sluggish,” he said. “The new export orders and employment indices contracted and were revised down from their earlier readings.

“That indicates that the manufacturing sector and the broader economy as a whole continues to lose momentum.”

Markets surge as China manufacturing lifts to 5-month high

SCOTT MURDOCH AND MITCHELL NEEMS THE AUSTRALIAN MAY 22, 2014 1:31PM

REGIONAL financial markets have reacted positively to a surge in Chinese manufacturing activity during May, with investors becoming confident the nation’s economic downturn would not be too damaging.

The HSCB flash Purchasing Manager’s index, published today, showed a result of 49.7, the highest level for five months.

A reading below 50 indicates the manufacturing sector is still contracting rather than expanding.

However, the May result was well up from April’s 48.1 reading and the financial markets forecast of 48.7.

The HSBC survey is considered the most reliable manufacturing industry barometer because it charts private sector output as well as state-owned enterprises.

The positive results prompted the Australian dollar to rally from US92.20c to US92.60, while the ASX200 was trading 61.9 points higher at 5486.4 by early afternoon.

In Hong Kong, the Hang Seng was up by 0.6 per cent while Tokyo stocks on the Nikkei were 1.6 per cent higher in early trade.

Despite the manufacturing surge, HSBC’s chief China economist Qu Hongbin said there were still weak patches in the Chinese economy which could prompt interest rate cuts later this year to ensure growth remains on track.

“Disinflationary pressures also eased over the month and output prices increased for the first time since November 2013,” he said.

“However, the employment index fell further to 47.3, which implies that this month’s uptick in sentiment has not yet filtered through to the labour market.”

Mr Qu said some tentative signs of stabilisation were emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs.

“But downside risks to growth remain, particularly as the property market continues to cool,” he said.

“We think more policy easing is needed to put a floor under growth in the coming months.”

I agree with it. “We think more policy easing is needed to put a floor under growth in the coming months.”