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New data offers more recovery hopes

JUST released figures measuring China's manufacturing activities signal a positive sign of recovery for the world's third-largest economy and better employment ratings show the fruit of China's efforts to boost development.

The brokerage firm CLSA said today that its China Purchasing Managers Index, which tracks the activities of over 115 companies in the manufacturing sector, rose to 50.1 in April from 44.8 in March. It was the first expansion in nine months - a reading above 50 indicates expansion.

Meanwhile, data compiled by the China Federation of Logistics and Purchasing also showed an upward trend. Its April PMI, which covers 700 manufacturers across the country, grew to 53.5 from 52.4 in the previous month, the federation said last Friday.

"The breakdown of the PMI showed a few upside surprises. New orders continued to increase, as domestic demand has picked up. New export orders - despite still being in contractionary territory - also showed encouraging signs," said Sherman Chan, a Moody's analyst.

The CLSA ratings showed that the output index gained 7 points from March to 51.3 in April. The index of export orders rose to 48.8 in April from 41.8 a month earlier while the new orders index, which measures future output, reached 50.9 in April from 43.6 in March.
A modest increase in jobs among Chinese manufacturers was also recorded, with the employment index rising to 50.9 in April from 47.1 in March.

"The outlook for China's manufacturing employment has become more optimistic, as local production orders are rising and external demand also seems not far from a bottom," said Chan.

China has been working on a 4-trillion-yuan (US$586 billion) stimulus package, as well as offering higher rebates on export taxes, a boost in credit and more subsidies for rural economic development to boost the economy.

However, some economists cautioned that it might be too early to declare there was a solid recovery and firmer domestic demand was a key to stabilization.

"The export orders may soften again in the coming months, depending on the global economic performance. We hope that domestic demand, as government spending gains traction, will keep the PMI above 50 in the months to come," said Eric Fishwick, head of the Economic Research at CLSA.

China's gross domestic product grew 6.1 percent from a year earlier in the first quarter, the weakest advance since 1992 when quarterly data were first released.

However, the performance was better than many economists expected and sparked hope for a recovery in the second quarter.


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