China’s factory activity continued to expand for the second consecutive month in April, in the latest sign that the economic recovery is picking up pace. The official manufacturing purchasing managers’ index (PMI) stood at 50.4 in April compared to 50.8 in March, the National Bureau of Statistics (NBS) said. The figure remained above the watershed level of 50, which indicates expanding activity, after the reading in March had ended five consecutive months of contraction. Meanwhile, China’s non-manufacturing PMI – a measurement of sentiment in the service and construction sectors – stood at 51.2 in April compared to 53 in March, representing the fifth straight month of expansion. The upbeat results followed recent better-than-expected gross domestic product growth of 5.3% in the first quarter, although retail sales and property investment remained weak links for the world’s second-largest economy.
Analysts said China’s GDP growth will likely accelerate in the second quarter, given a low comparison base in the previous year and stepped-up macro-economic policy support, including driving large-scale equipment renewal and the trade-in of consumer goods. Meanwhile, they cautioned that the economic recovery trend is not yet solid, with factory activity expanding at a slower pace, and said this underscores the need for greater policy support to tackle the insufficient demand faced by some sectors and to address property sector woes. The Political Bureau of the Communist Party announced that the third plenum of the Central Committee will be held in July, adding that the broader economy is still facing challenges, including a lack of effective demand, high operational pressures on enterprises, and risks and potential dangers in key areas.
Zhou Maohua, Researcher at China Everbright Bank, said the latest data indicates a stabilizing economy, while the slower expansion points to a moderate recovery in domestic demand. He added that May’s manufacturing activity growth may slow due to the five-day May Day holiday, while the services sector will likely improve significantly in May. “With robust support from macro-economic policies coupled with the low base effect from last year, economic growth in the second quarter is expected to further accelerate,” he said. NBS data showed a mixed picture of the economic recovery, with China’s GDP growth accelerating to 5.3% year-on-year in the first quarter, while March’s industrial profits declined 3.5%. Although the first-quarter’s real GDP growth beat expectations, “March monthly data confirmed slowing activity momentum at the tail end of the last quarter, with retail sales and industrial production declining on a sequential basis”, said Louise Loo, Lead Economist at British think tank Oxford Economics. Meanwhile, she said the external environment is likely to offset some of the domestic oversupply pressures, providing support to the Chinese economy this year, the China Daily and Global Times report.
