23 July 2019

The Big Picture: STRONGER PMI

As he reiterated a pledge to maintain stable growth and expressed confidence in achieving the goals set for the economy, remarks made by Premier Li Keqiang this week suggest that a series of government initiatives, including tax cuts and sector-specific support measures, have begun yield results in upholding Asia’s biggest economy. The Chinese leader made those comments on Monday, a day before authorities released the official manufacturing data.

Figures unveiled Tuesday showed China’s Purchasing Managers’ Index (PMI) for the manufacturing sector rose to 51.1 in September from 51.0 in August, hitting a 17-month high and offering more evidence that the economic rebound is on track. The figure climbed for the third consecutive month, with both new orders and new exports orders showing gains.

While the data is positive, one should bear in mind that the recovery is not across the board with the PMI for smaller companies still in the contraction zone. A breakdown by enterprise type shows that the large enterprise PMI rose to 52.1 in September, while the PMI for medium-sized enterprises edged up to 49.7 and the small enterprise index fell to 48.8.

That said, the recovery in production activities since July is likely to provide some ground for firmer economic growth for the third quarter. China’s GDP is expected to have accelerated in the third quarter, likely to 7.7 percent from the second-quarter pace of 7.5 percent. The data is scheduled to be released on Oct. 18. The government had earlier set the full-year economic growth target at 7.5 percent.

New pollution alert: In the latest effort to fight the worsening pollution, China Meteorological Administration and the Ministry of Environmental Protection have unveiled plan to roll out a pilot air quality warning system in heavy-polluted cities such as Beijing and Tianjin next month. Earlier, the Beijing municipal government put out an action plan to combat pollution, under which it sought to reduce concentrations of PM2.5 particles by 25 percent to about 60 micrograms per cubic meter by 2017 from last year, cutting coal use for electricity consumption by 13 million metric tons by 2017, and keeping the number of cars below 6 million. After seeking rapid growth at the expense of environmental protection in the past decade, Chinese leaders including former President Hu Jintao and his successor Xi Jinping have vowed to make a green economy their top priority. Authorities are expected to roll out more initiatives including green car subsidies and further support policies for alternative energy, while accelerating a traffic congestion levy, which said to be under discussion.

– Contact the reporter at [email protected]


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