HSBC Says Initial China Manufacturing PMI Grows to 50.9 in December

HSBC says China PMI rose to 50.9 in December

HSBC says China PMI rose to 50.9 in December

On the 14th of December, HSBC Holding Plc informed that the initial China manufacturing grew to 50.9 in December. The results of the HSBC survey show that the world’s second economy is on track to the economic recovery despite the fact that the country is facing external weaknesses. The growth, which was seen in new orders and employment, means that China may expect better days. In addition, the China PMI suggests that the country will be able to resist an evident slowdown in exports.

China PMI in December

According to the analysis released by HSBC Holdings Plc and Markit Economics, the China manufacturing PMI rose to 50.9, from a reading of 50.5 in November. In November China saw its PMI above the expansion-contradicting line of 50 for the first time in more than one year. The methodology of HSBC’s initial PMI is based on replies from approximately 85 percent to 90 percent of the total respondents in monthly survey which is conducted by the British multinational banking and financial services company.

The initial survey on the China manufacturing PMI was released earlier in the month due to the upcoming Christmas holidays. However it implies that China’s economic growth has accelerated in the final quarter of the year. Despite the promising and reassuring results, China will likely see the slowest full-year economic growth since 1999.

Certainly the HSBC’s initial China manufacturing PMI will strengthen confidence in the economic recovery of the world’s dragon. Analysts underline that recent improvements in manufacturing might also support employment, thereby making the current political shift in China softer and easier at the same time.  Hongbin Qu, chief economist for China at HSBC Holdings Plc, noted that domestic demand had the biggest impact on gains, underlining: “The drop of new export orders and the downside surprise of November exports growth suggest the persisting external headwinds. This calls for Beijing to keep an accommodative policy stance to counter-balance the external weakness, provided inflation stays benign.”

Is China heading to recovery?

The findings of the HSBC’s initial China manufacturing PMI suggest that China is on track to the economic recovery. However it should be underlined that current growth is driven by domestic demand. In addition, China will certainly face unsetting external conditions which might slower its economic recovery. It is likely that China will see the rebound in the fourth quarter as earlier this year the government decided to use tools such as interest-rate cuts and the stimulation of investment project approvals.

Zhang Zhiwei, chief China economist at Nomura Holdings Inc., is convinced that the China GDP will increase approximately 8.4 percent in the final quarter of the year, up from about 7.4 percent in the third quarter.

Even though China economy is stabilizing at last, the country will without a doubt face diverse challenges including unsetting external conditions. It is widely expected that macroeconomic conditions will be kept firm as required. The results of an annual meeting, which is due to take place on the 15th and 16th of December, should bring a layout of economic policies and basic goals for 2013.

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