China factory-activity gauge holds up in May

A worker checking steel wires at a warehouse in Dalian, Liaoning province, China. Activity in China's steel industry rebounded sharply last month, contributing to a faster growth in the manufacturing sector.
A worker checking steel wires at a warehouse in Dalian, Liaoning province, China. Activity in China's steel industry rebounded sharply last month, contributing to a faster growth in the manufacturing sector.PHOTO: REUTERS

BEIJING • China's manufacturing sector grew faster than expected last month as activity in the steel industry rebounded sharply, an official survey showed yesterday, allaying concerns of slowing economic momentum as Beijing cracks down on financial risks.

The National Bureau of Statistics' official Purchasing Managers' Index (PMI) held up at 51.2 in May, in line with April's number, which was the lowest in six months. The 50-point mark separates growth from contraction on a monthly basis.

New orders kept pace with April at 52.3, with export orders firming by 0.1 percentage point to 50.7, suggesting external demand held up.

Production in the month stayed within the expansionary territory, although growth eased to 53.4 compared with last month's 53.8.

Activity in China's steel industry expanded at the fastest pace in a year in May, supported by an increase in new orders, a separate survey showed, suggesting still-solid demand in the construction sector.

The overall results of the survey should soothe concerns of slowing momentum in the world's second-biggest economy as the authorities crack down on risky lending to curb financial risks.

Official data released last Saturday showed profits earned by Chinese industrial firms slowed to their weakest in four months in April.

Businesses attributed the slowing profit growth to falling prices of finished products and raw material costs, the statistics bureau said.

Those worries were inflamed last week when Moody's Investors Service downgraded China's credit ratings for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

China's economy grew a faster-than-expected 6.9 per cent in the first quarter, boosted by higher government infrastructure spending and a gravity-defying property boom. But property sales growth slipped in April and a strong rebound in commodity prices appears to have peaked, pointing to a continued slowdown in the industrial sector.

The PMI survey showed the employment sub-index rose to 49.4 from 49.2 in April, while the raw materials inventories sub-index was 48.5, compared to April's 48.3.

Growth in China's services sector also accelerated to 54.5 in May, compared with the previous month's reading of 54.0.

Beijing has been treading cautiously to contain financial risks and a build-up in debt while maintaining economic growth, but analysts are sceptical other economic sectors will be able to pick up the slack if the property market slows.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 01, 2017, with the headline 'China factory-activity gauge holds up in May'. Print Edition | Subscribe