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Manufacturing improves but service sector weakens in May

By Wang Yanlin | June 1, 2015, Monday | Online Edition

CHINA'S manufacturing activity improved in May, while the service sector continued to weaken, indicating complications in the world’s second-largest economy, a survey showed today.

The official Purchasing Managers' Index, a comprehensive gauge of operating conditions in large industrial companies, landed at 50.2 last month, up from 50.1 in both April and March, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 means expansion. The latest figure marked the third consecutive month for an expansion.

However, the non-manufacturing PMI, a counterpart for the service sector, dropped 0.2 points from a month earlier to 53.2 in May.

Zhao Qinghe, an analyst at the bureau, said the mixed performance suggested continued economic uncertainties but there were positive signs for a long-awaited stabilization.

“China’s intensive supportive policies in recent months have shown effects on the manufacturing sector,” Zhao said. “But the improvement remained marginal. Downward pressures still existed including risks from tight cash flow, insufficient market demand, rising labor costs and weak trade.”

The component indices showed industrial production increased for the third straight month in May to 52.9, up from April’s 52.6, while new orders rose 0.4 points to 50.6. The input price landed at 49.4, up for the fourth month in a row.

Zhao said the service sector grew at the slower pace last month due to less activity in transport and catering industries. But it remained stable.

Zhou Hao, an economist at Australia & New Zealand Banking Group Co Ltd, said China’s pro-growth policies helped the improvement in the manufacturing PMI.

“The policies appeared to have helped stabilized the growth momentum,” Zhou said. “For instance, the coal consumption in the major power plants remained stable in early May, and the crude steel output picked up slightly during that period.”

China's economic growth slowed to 7 percent in the first three months, the weakest quarterly expansion in six year which prompted the central bank to take surprisingly intensive policy-easing actions in the past few months including cuts of reserve requirement ratio and interest rates.

But Zhou said China’s economy needs further easing measures, and fiscal policies should be more needed now than monetary policies.

“Monetary easing has had a limited impact on the economy,” Zhou said. “We expect fiscal policies and targeted measures will continue to be rolled out in the remainder of the year.”

As part of the fiscal efforts to revive and push forward the manufacturing sector, China recently unveiled its “Made in China 2025” vision, which highlighted the next stage of its manufacturing sector from plain production to advances in space, e-commerce, green energy and bio-engineering.

The plan is to promote high-technology industry by 2025 and move the economy away from the low-value manufacturing model that has fueled the country’s meteoric rise over the past quarter of a century.

Economy


 

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