Chinese PMI hits 6-month high: HSBC

PHOTO: Chinese PMI hits 6-month high: HSBC

BEIJING - China's manufacturing activity expanded this month to a six-month high, HSBC said yesterday, a further sign that a rebound in the world's second-largest economy is gaining momentum on improving demand.

The British banking giant's preliminary purchasing managers' index (PMI) this month hit 51.2, the highest since March, when it stood at 51.6, HSBC said in a statement.

The result was higher than last month's final reading of 50.1, which had improved from an 11-month low of 47.7 in July and ended three months of contraction, according to the bank.

The index tracks manufacturing activity in China's factories and workshops, and is a closely watched gauge of the health of the country's economy.

A reading above 50 indicates growth, while anything below signals contraction.

This month's figure suggested that China's ongoing growth rebound is consolidating on the back of "simultaneous improvements" in overseas and domestic demand, HSBC economist Qu Hongbin said in the release.

"We expect a more sustained recovery as the further filtering-through of fine-tuning measures should lift domestic demand," he said.

"This will create more favourable conditions to push forward reforms, which should, in turn, boost mid- and long-term growth outlooks."

Bank of America Merrill Lynch economists said that, given the strengthening of the rebound, China is expected to achieve this year's growth target of 7.5 per cent, which will likely lead Beijing to tone down its pro-growth rhetoric issued since late June.

In a research note, Merrill Lynch economists Lu Ting and Zhi Xiaojia said: "Good data since August means that markets should not expect a big stimulus package."

They added that fast-rising home prices are another factor against continuing policy easing.

But the government is unlikely to take any aggressive tightening measures either, as growth and financial stability are still "highly valued" for the new leaders ahead of a key party meeting scheduled in November, they said.

The first half of this year saw greater concerns about China's economy after an expected rebound from growth of 7.7 per cent last year - the worst performance in 13 years - failed to materialise.

HSBC said the final PMI reading for this month will be published on Monday.