China factory index hits 5-year high as economy gains steam

Mar. 31, 2017 – China’s factory activity ticked up again last month to its highest level in five years, according to an official survey released Friday, in a fresh sign that the world’s No. 2 economy is picking up steam.

The index based on a survey of purchasing managers climbed for a second straight month in March to 51.8, its strongest level since April 2012, from 51.6 in the previous month.

The PMI by the Chinese Federation of Logistics and Purchasing is based on a 100-point scale, with numbers above 50 indicating expansion.

“The manufacturing sector continued to maintain a steady trend,” said Zhao Qinghe of the National Bureau of Statistics, which released the report. Production and new orders were key drivers of the latest growth, Zhao said, adding that high-tech manufacturing grew rapidly while conditions in traditional industrial production improved.

The report’s measures of production and new orders expanded at a faster pace in China’s key manufacturing sector, which is a major part of the broader economy employing many millions of workers churning out electronics, clothes and toys for export.

Factories stopped shedding staff for the first time in five years, as the report’s employment sub-index rose to 50, the first time it has not been in contractionary territory since May 2012.

Chinese manufacturing and trade with the U.S. will be on the agenda when U.S. President Donald Trump meets with Chinese counterpart Xi Jinping on April 6-7 in Florida. Trump, who accused China of unfair trade practices during his campaign, tweeted Thursday that the meeting would be “very difficult.”

Meanwhile, the official non-manufacturing PMI rebounded, rising to 55.1 last month from 54.2, indicating strengthening domestic demand in China’s service sector.

China’s PMI is widely watched because it provides one of the earliest insights into the economy. A private PMI by financial magazine Caixin and Markit is due Saturday. Official GDP figures are expected in mid-April.

The latest data add to recent evidence that China’s economy is stabilizing. Earlier this month, a report found imports and exports expanded in the first two months of the year after weakening near the end of 2016.

Beijing is targeting economic growth of about 6.5 per cent this year, down from 2016’s 6.7 per cent.

China’s National Statistics Bureau website: http://www.stats.gov.cn