Does Chinaâ€™s Manufacturing Sector Really Look Positive?
Published By : 29 Jul 2015 |Published By : QYRESEARCH
In July, the manufacturing activity across smaller Chinese firms has slowed down. This has again led the market to speculate about the future of China’s economy, and the reliability of economic data released by the Chinese government. The manufacturing PMI gauge released by Caixin-Markit for the month of July dropped significantly last week to 48.2. This is the lowest since April 2014. The reading has led industry analysts question that why a survey by private company shows weak economy while the government data mentions strengthening of the economy in last couple of months.
The PMI chart made by Caixin-Markit tends to be more volatile compared to the PMI survey released by the government. Research analysts have predicted that the manufacturing PMI gauge released by the government will be above the level 50. The reading level 50 is important as it separates industry expansion from contraction. A reading above 50 would indicate improvement in manufacturing activity. However, analysts point out that the reading level in the government’s manufacturing PMI gauge would fall below 50.2 as recorded in June owing to recent weaknesses observed in Taiwan sales orders from Hong King and China.
Though there are differences between the NBS and Markit surveys, another reading level above 50 will raise questions about the reliability of government released data. The NBS survey covers the entire manufacturing sector of China including the small and large manufacturing units, whereas Markit survey only covers smaller manufacturing companies. Though the surveys cover different sized firms, it is surprising that two reports covering the same sector to be contradictory. The MBS survey results are expected to be released by the end of this week.