Chinese Manufacturing Increases

Monday, 2 September, 2013

A sense of relief oozed from economic corners as Chinese figures showed their economy to be growing again after two quarters of GDP contraction. The data comes from the official Purchasing Managers Index, released today, which rose to 51 from 50.3: ‘the PMI is a key gauge of the sectors health and a reading above 50 indicates expansion,’ with chief China economist at JP Morgan, Haibin Zhu, saying ‘we are seeing clearer signs of economic conditions improving.’

The growth in manufacturing seems to have been spurred by an increase in domestic consumption, a trend that the government has been encouraging so as to offset the West’s decline in demand. The state has suspended VAT and turnover tax for small businesses. Yet one wonders how long the boost in PMI will satisfy those concerned about China’s general slowdown, from more than 10% in 2010 to 7.5% in the last quarter. Many are saying that China’s boom is very much over and a slow decline to the OECD standard of 3% annual growth is on the horizon. Regardless, for many, especially in the commodities industry, China’s sustained manufacturing levels will be pleasing news in a time that is largely ominous.