World Economy

China Factory Gauge Stable at Post-2014 High

China Factory Gauge Stable at Post-2014 HighChina Factory Gauge Stable at Post-2014 High

China’s official factory gauge steadied at the highest level in almost two years while services picked up, suggesting that the economy’s stabilization continued last month and reducing prospects for additional policy easing.

Manufacturing purchasing managers index remained at 50.4 in September, the National Bureau of Statistics said on Saturday. It compares with a median estimate of 50.5 in a Bloomberg economist survey and 50.4 the prior month. Numbers higher than 50 indicate improving conditions.

Nonmanufacturing PMI rose to 53.7 from 53.5 in August. New export orders rose to 50.1, signaling the first expansion since April. On Friday the private Caixin Media and Markit Economics China Manufacturing PMI came in at 50.1 for September, matching estimates.

The data add to evidence of improvement as government fiscal support and a soaring property market help underpin growth. Fresh signs of stability may lead policy-makers to remain on hold after keeping the benchmark interest rate at a record low for almost a year.

“The economy is stabilizing on all the support that the government has given through monetary easing and fiscal spending,” which has fueled the investment and supported more upbeat growth forecasts, said Iris Pang, senior economist for Greater China at Natixis SA in Hong Kong. Still, that doesn’t necessarily mean “everything is really turning better.”

“Property and infrastructure investment have propped up growth and some enterprises are becoming more profitable in the process of cutting overcapacity,” said Wen Bin, a researcher at China Minsheng Banking Corp. in Beijing. “Longer-term pressure still lingers. China must push forward supply-side reform and maintain stable liquidity to support the real economy.”

“New exports orders have rebounded above 50, which might be related to the yuan’s depreciation against a basket of currencies,” making shipments more competitive, said Tommy Xie, economist at OCBC Bank in Singapore. “It may not be the purpose that the Chinese government wants, but now it seems to be the result of a weaker yuan.”

“There’s been some progress” toward stabilization as larger companies underpinned growth, said Raymond Yeung, chief greater China economist at Australia and New Zealand Banking Group Ltd. in Hong Kong. “The employment reading is not so encouraging. The government needs to find some way to address the unemployment stress.”

Manufacturing employment continued to edge up but still indicated deterioration, rising to 48.6 from 48.4. Large enterprises rose to 52.6, while the reading for small companies retreated to 46.1.

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