BEIJING — The stronger-than-expected results from surveys on China’s manufacturing and non-manufacturing sectors have added to a slew of upbeat data on China’s economy.
China’s manufacturing sector in March stayed above the boom-bust mark for the eighth month in a row, the National Bureau of Statistics (NBS) said on March 31.
The country’s manufacturing purchasing managers’ index (PMI) came in at 51.8 in March, higher than the 51.6 recorded in February. The reading beat market expectations and was the highest in nearly five years. In April 2012 it reached 53.3. A PMI reading above 50 indicates expansion.
It also marks the second consecutive month for the manufacturing PMI expansion to accelerate. Major sub-indexes, including production and new orders, all posted upticks, pointing to strengthened momentum, according to NBS statistician Zhao Qinghe.
“China’s manufacturing sector and the broader economy are likely to continue steady growth on the back of favorable macroeconomic conditions and rebounding foreign markets demand,” said investment bank China International Capital Corporation in a research note.
A separate NBS survey released on March 31 revealed that China’s non-manufacturing sector continued to expand in March, nearing a three-year record high.
The non-manufacturing PMI came in at 55.1 in March, up from 54.2 in February, with retail, airlines, courier services, internet and software, finance, and insurance among the fastest growing service sectors.
“ The Chinese economy has staged a strong start, which has laid a solid foundation for the whole year,” said Bi Jiyao, deputy director of the Academy of Macroeconomic Research.
The surveys on March 31 came as Brexit and the US central banks’ recent interest rate hike kept global appetite for risk in check.
China’s major industrial companies registered a 31.5 percent profit growth year on year in January and February, in tandem with improved profitability of their main businesses, supported by coal mines, oil refineries and chemical industries, according to NBS data released on March 27.
The PMI surveys reinforced the message conveyed by increased industrial business profits and shed light on economic restructuring progress.
“High-tech manufacturing continued its rapid expansion, and some traditional manufacturing production and management conditions continued to be on the mend,” Zhao said, adding that oil refinery, coking and metal smelting industrial all witnessed robust growth.
The sub-index for the high-tech manufacturing industry topped 54.2 in March, well above the 51.8 registered across all manufacturing industries.
China is seeking to transition to an innovation and service-driven economy from one heavily reliant on investment and exports of low value-added goods.
The service sector accounted for more than half of China’s economy last year and the majority of growth, as rising incomes made hotel and travel services more affordable.
HIGH BORROWING COSTS
Not every figure was good news. Four in ten polled industrial companies felt the pinch from tight cash flows, while more than half of smaller businesses were troubled by difficulties of high financing costs.
In a similar vein, China’s central bank, for the sixth consecutive business day, skipped the open market operations of reverse repos on March 31, draining liquidity from the market, creating higher borrowing costs for investors. Higher operational costs normally translate into waning profitability.
In the interbank market, the overnight Shanghai Interbank Offered Rate, which measures the cost at which Chinese banks lend to one another, climbed 3.14 basis points to 2.5384 percent on the morning of March 31, with the rate for one-week loans rising 2.90 basis points to 2.8500 percent.
Authorities are putting the foot on the brakes to curb debt-fueled economic growth and house prices in major cities.