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China’s manufacturing sector improves more than expected in November

By Leng Cheng | December 1, 2016, Thursday | Online Edition

CHINA'S economy continued to show signs of stabilization in November with two separate manufacturing surveys pointing to better-than-expected growth.

The official manufacturing Purchasing Managers' Index (PMI), which measures large state-owned factories, was at 51.7 in November. It matched the previous high in July 2014 and was the highest reading since April 2012, according to National Bureau of Statistics.

The outcome accelerated from previous month's 51.2 and above the 50-point mark that separates growth from contraction on a monthly basis.

While the Caixin manufacturing PMI also beat analyst forecasts of 50.8, although it fell to 50.9 from 51.2 in October. The report focuses on mid-size companies not included in the official survey.

China's manufacturing sector showed signs of picking up in recent months, buoyed by a government stronger spending in infrastructure building and a housing boom.

A jump in commodity prices also has boosted profits for firms selling building materials from cement to steel, as the improvement of their financial fundamentals was given a breath from the national campaign of production cut.

Factory output quickened in November, with the reading of the sub-index rising to 53.9 from 53.3.

Total new orders rose to 53.2 from October's 52.8, while new export orders also increased and hit at least a 12-month high of 50.3.

A separate reading on the services sector also showed the pace of growth quickened in November from the previous month, with its reading standing at 54.7 in November, the strongest since June 2014.

Many analysts predicted that the fully year growth rate could set to hit government target range between 6.5 to 7 percent.

Lian Ping, chief strategist at Bank of Communications, told at a forum in Shanghai yesterday that he expected that the economy to expand by 6.7 or even 6.8 percent of 2016, and it’s less possible for the growth figure going downwards by year-end.

“The pick up of economy was mainly lifted by increasing infrastructure projects to stem growth,” Lian said. “With the rising of producer price index, upstream activity picked up very quickly, and it will continue to rise in December hopefully.”

Lian also mentioned the surging number of public private partnership (PPP) projects that’s pushed forward by the government to boost infrastructure investment with private capital while not adding pressure to already heavily indebted local governments.

“If you count on the number of it, you would find the number of it surged to nearly 10,000 this year by far from roughly 900 last year. That could lead to a growing fix-asset investment and other construction-related readings,” Lian said.

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