adminBEIJING – The latest economic data out of China was not enough to convince analysts at Barclays Capital in Hong Kong that China is firmly on the road to recovery.
Yesterday, the National Bureau of Statistics released China’s PMI Index, showing it rose moderately to 51 in June from 50.8 in May and 50.4 in April.
Anything over 50 indicates expansion.
However, the numbers can in just in line with consensus and slightly less than Barclays’ estimate of 51.2.
Moreover, the final reading of the HSBC China PMI was revised down to 50.7 from 50.8.
Nitpicking, perhaps, but enough to keep one of the world’s biggest investment banks relatively neutral on China, at least in sentiment.
Overall, the continued gains in the PMI readings suggest the long list of “mini-stimulus” measures rolled out by the government since March are taking effect and that a moderate recovery is underway.
Jian Chang, Barclays’ China economist in Hong Kong, forecast second quarter GDP growth of 7,4 percent, implying a rise in sequential growth to 7,4 percent from 5,8 percent in the first.
The recovery is becoming more broad based, with higher new orders, export orders, and output.
This suggests a continued recovery within China’s manufacturing, thanks to local and foreign demand.
The new orders index climbed to a nine-month high of 52.8 in June from 52.3 in May.
The new export orders index returned to the expansion territory, rising to a seven-month high of 50.3.
The import index also improved, but remains in contraction territory.
That said, China’s recovery remains fragile, with the momentum weaker than in previous cycles.
“We have argued over the past year that with the economy facing a structural downward adjustment as well as a cyclical downturn, it will be very difficult to try to meet a 7,5 percent target,” Chang wrote in a note to clients on yesterday.
The latest PMIs in 2014 came in at the lower end of the five-year range and lower than the average by a wide margin, except for June.
Also, the latest government-led and infrastructure-driven recovery has benefited larger enterprises as usual, with the PMIs for large- and medium-sized enterprises continuing to post above-50 readings in June as a result of Beijing’s stimulus.
The official PMI for small enterprises fell to 48.4 in June, highlighting the difficulties facing smaller firms, with anecdotal evidence suggesting rising credit defaults and bankruptcies amid the ongoing property market correction.
Last night, the iShares FTSE China exchange traded fund declined by half a percent.
It is down 3,47 percent year to date. – Forbes.
Online Reporter