China’s manufacturing purchasing managers' index (PMI) continues steady expansion in January and stays above 51.0 percent for the fourth consecutive month. Non-manufacturing PMI also edges up 0.1 percentage points to 54.6 percent from previous month due to the drive of factors like the Spring Festival holiday. It suggests that the economy might embrace a steady start in 2017.
According to data jointly released by China Federation of Logistics & Purchasing and the National Bureau of Statistics, China's manufacturing PMI comes in at 51.3 percent in January 2017. Though the figure is 0.1 percentage points lower than that recorded in December, it stays above 51.0 percent for four consecutive months, hits the highest record in the same period since 2012 and continues steady expansion.
According to 13 sub-indicators, the production index still stays above 53 percent and industrial operation remains in the prosperity zone. In addition, indexes concerning finished product inventory, purchase quantity and export all have climbed.
Zhang Liqun, a researcher with the Development Research Center under the State Council, analyzes that though the PMI Index in January drops slightly, production expectation index climbs, showing that industrial enterprises hold steady expectation on future market outlook and are fully prepared for the production and operation after the Spring Festival. Taken together, the economic operation in 2017 might embrace a steady start.
Of note, several indicators reveal multiple positive economic factors. For instance, middle and large-sized enterprises still see active production activities; high-end manufacturing industries and high-tech industries however rose despite of the Spring Festival holiday.
Data shows that in January, the PMI of large-scale enterprises hits 55.1 percent, staying at a relatively high level, while the PMI of middle-sized enterprises climbs 2.3 percentage points from previous month to 53.1 percent.
While the manufacturing industry keeps expanding, the non-manufacturing industry also maintains steady and positive growth. Data suggests that non-manufacturing PMI registers 54.6 percent in January, 0.1 percentage points higher than that recorded in last December.
“Non-manufacturing economic activities see a good start in 2017 and continue the steady and relatively rapid development seen since the second half of 2016”. Wu Wei from China Logistics Information Center believes that along with rising consumption power, improving consumption environment and gradually advancing consumption upgrading, the non-manufacturing industry, especially the service industry, will see gradually increasing development momentum.
Though economic operation is stable, sub-indexes of PMI show that economic growth is still besieged with many problems.
Statistics data shows that the purchase price index basically keeps rising since 2016. By January 2017, the purchase price index has stayed above 60 percent for four consecutive months. But in sharp contrast, the factory price index didn’t rise markedly until the fourth quarter of 2016. However, the factory price index dived over 4 percentage points to 54.7 percent, nearly 10 percentage points lower than the purchase price index.
Once this unbalanced situation worsens, it may affect enterprises’ willingness to expand production, says Chen Zhongtao at China Logistics Information Center.
“Investigation shows that over 40 percent enterprises have reported financial constraint and insufficient demand. To reduce financing costs and expand effective demand are still key factors for the consolidation of real economy. At the same time, enterprise staffs returning home for the Spring Festival also reflected that an increasing number of enterprises are facing rising labor costs and tight labor supply,” Zhao Qinghe, senior statistician at the service industry investigation center under the National Bureau of Statistics says.
Chen indicates that China should maintain the stability of macro economy this year and strive to improve the market environment, to improve the vitality of the micro economy. On the one hand, moderately expand the total demand and increase the orders for enterprises; on the other hand, promote the supply-side reform, reduce integration costs of enterprises and improve the profitability of enterprises.
Translated by Jennifer and Adam
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