Upbeat sentiment: Workers at an automotive aluminium wheel hub factory in Binzhou city in east China’s Shandong province. Exporters saw new orders rising for the fifth straight month in May. — AP
BEIJING: China’s manufacturing activity expanded at the fastest pace in almost two years in May, according to a private survey, contrasting with weak official data that dented the country’s growth outlook.
The Caixin manufacturing purchasing managers’ index (PMI) rose to 51.7 last month from 51.4 in April, slightly above the median forecast of 51.6 by economists in a Bloomberg poll and the highest since June 2022.
Any reading above 50 suggests an expansion.
The upbeat private survey results compared with China’s official manufacturing PMI published last Friday showing factory activity unexpectedly contracted last month.
The two surveys covered different sample sizes, geographic locations and types of businesses, with the Caixin poll focusing on smaller and export-oriented firms.
China’s benchmark CSI 300 Index of onshore stocks erased losses after the Caixin release, gaining as much as 0.6% with investor sentiment boosted by improving home sales data and positive vehicle sales numbers.
Chinese shares trading in Hong Kong rose as much as 3.1% following drops in the previous four sessions.
The accelerated expansion indicated by the private gauge could offset some concerns triggered by the official survey about weakening momentum in the manufacturing sector, which Beijing relies on to boost the economy this year.
Exporters saw new orders rising for the fifth straight month in May, albeit at a slower rate, the Caixin results showed, suggesting foreign demand held up for Chinese goods.
“China’s economy is generally stable and remains on the road to recovery,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the release of the data.
That said, pressure on employment and weaker demand than supply “remain prominent issues,” he said.
“Policies aimed at stabilising the economy, boosting domestic demand and increasing employment need to be strengthened and consistent.
“Investors shouldn’t see the May rise in China’s Caixin PMI survey as a sign that a manufacturing recovery is gaining traction,” said Zhe
The survey’s climb is probably an anomaly that reflects technical factors related to seasonal adjustments.
High frequency indicators, which align better with the official PMI, suggest there is no robust upturn in manufacturing occurring,” according to Bloomberg economist Chang Shu and David Qu.
Manufacturing production rose at the fastest pace since June 2022, with firms in the consumer segment reporting sharp output growth in May, according to the private survey, jointly published by Caixin and S&P Global.
However, the expansion in new orders slowed slightly from April, while companies remained hesitant to take on additional workers, it showed.
The Caixin PMI has outperformed the official index for seven consecutive months since October.
Economists have attributed the differences between the official and the private surveys this year to improved external demand but a subdued domestic market.
Key to China’s efforts to hit an annual growth target of around 5%, the manufacturing sector is threatened by rising trade barriers from the United States, European Union (EU) and other countries as tensions mount over complaints of Chinese overcapacity and unfair competition.
The EU has opened a barrage of trade probes against Beijing on the grounds of anti-dumping and unfair subsidies, especially in the clean-technology sector.
The bloc must inform Chinese electric vehicle exporters whether it intends to impose tariffs – and how high they would be – by early June, and they could go into effect a month later. — Bloomberg
