China's economy on path of steady growth

China's economy on path of steady growth
An index of Chinese manufacturing activity saw a sharp improvement in May, hitting a five-month high, HSBC said, but still showed contraction and the bank urged more government action to kickstart the world's number two economy.

CHINA - Hope is on the rise that China's economy is growing steadily following a more encouraging performance in the manufacturing and service sectors in May.

The final reading of the HSBC/Markit Purchasing Managers Index for Chinese manufacturing was 49.4, up from April's 48.1 and the highest since February, according to figures released on Tuesday.

China's non-manufacturing PMI was 55.5, the government reported, 0.7 points higher than April, even though real estate remained sluggish nationwide.

The trend is expected to last into the second and third quarters, said Tao Wang, an economist at UBS, as "exports are picking up and the effect of the government's mini-stimulus is being gradually felt".

The recovery came as US manufacturing activity expanded in May. Financial data firm Markit said its US manufacturing PMI rose to 56.4 in May, from 55.4 in April.

Meanwhile, the Eurozone PMI fell to a 6-month low of 52.2 in May, Markit reported on Monday.

The HSBC/Markit manufacturing PMI dovetailed with an official May PMI released on Sunday, which hit a five-month high of 50.8, up from April's 50.4, according to the National Bureau of Statistics.

The official PMI is weighted more toward bigger State-owned enterprises, while the HSBC/Markit survey includes more smaller private firms.

"The economy is stabilizing," said Qu Hongbin, chief economist for China at HSBC, "although it is too early to say that it has bottomed out, particularly in light of a weaker property sector".

Among the sub-indices of the PMI result, the one for new export orders was the most upbeat. It leapt to a four-year high of 53.2 in May from April's 48.9, underscoring the rising overseas demand.

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