App | 中文 |

Overseas investors stay positive over China’s economic prospects

Updated: Jun 3,2016 5:39 PM

China’s latest purchasing managers’ index (PMI) for the manufacturing sector has beaten expectations, with overseas investors generally believing the country has shown positive signs in structural reform, despite uncertain economic growth.

As a key measure of factory activity, China’s PMI for May has come in at 50.1, unchanged from April. The reading above 50 for three consecutive months indicates expansion in the manufacturing sector remains steady.

The data is considered a key indicator of China’s economic transformation. In a Wall Street Journal survey, 11 foreign analysts said weak demand in the overseas market could continuously drag down China’s manufacturing industry. They believed after a two-month moderate expansion, China’s PMI would, this month, shrink slightly to 49.9 percent.

The better-than-expected data has, to a certain extent, eased overseas anxiety towards China’s economy. Deutsche Presse-Agentur says China’s PMI reading for the recent three months indicates the country, as the world’s second largest economy, is in an upward state.

The Wall Street Journal also quoted a senior economist at the Australia and New Zealand Banking Group (ANZ) as saying China’s surprising manufacturing PMI showed the country’s economy had kept its momentum of growth, bolstered by assets investment and fiscal expenditure.

In addition, as the economists contend, the supply-side reform and de-leveraging will continue to be placed at the core of China’s economic policy, and the central bank in China will also focus on maintaining market liquidity.

Yang Yuting, another senior economist at the ANZ Bank group, said the data indicated that under the support of fiscal expansion and investment in fixed assets, China had shown continued growth. He says if the manufacturing PMI in June remains above the divide line of 50, China’s economic growth at the second quarter is expected to be maintained at 6.6 to 6.8 per cent.

The Wall Street Journal also reported the economy had stabilized to help the government promote structural reform, in order to reach production capacity, foster economic growth and create new space.

London-based economic forecaster, Capital Economics, said in the next few quarters, China’s economic vitality would be enhanced and its economic data would improve, rather than worsening.

The Wall Street Journal also points out that China’s stabilized economy can create new space for curbing overcapacity and foster new momentum for economic growth.

Reuters notes that because the foundation for China’s economic stabilization is not solid, economists generally expect the Chinese government to continue encouraging infrastructure investment.

Industry insiders say the recent manufacturing PMI trend shows China’s economic rebound is gaining momentum, while some uncertain factors, such as the weak market demand, are also worthy of attention.