China Caixin's factory PMI shrinks

BEIJING • A private gauge of China's manufacturing fell back into contractionary territory last month, adding to recent evidence that the economy's strong start to the year is levelling off.

Caixin Media and Markit Economics manufacturing purchasing managers' index fell to 49.6 from 50.3 in April, the lowest reading since June 2016. Output fell to 50.2 versus 51 in April.

The private measure - with a smaller sample size - contrasts with the government's PMI reading released on Wednesday, which showed the manufacturing PMI was steady last month.

The official report also suggested that China's factory recovery was spreading to the smaller and nimbler private sector as price pressures on them abate.

China's policymakers are walking a tightrope, seeking to rein in excessive leverage in parts of the financial system while ensuring there is enough credit flowing to the real economy to keep growth humming.

Economists led by Hong Kong-based Wang Tao wrote in a report: "We should not underestimate the senior leadership's desire to contain financial leverage and risk, efforts which have only just begun, even if it may lead to slower credit and economic growth.

"However, given the need to meet other government priorities, most notably growth stability, we expect the government to constantly adjust the pace and magnitude of its supervisory tightening to strike a delicate balance."

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A version of this article appeared in the print edition of The Straits Times on June 02, 2017, with the headline 'China Caixin's factory PMI shrinks'. Print Edition | Subscribe