Chinas factory growth was unchanged at an 18-month high in November from a month earlier on firm domestic and foreign demand, signaling the Asian economys recovery is sustaining momentum while the government undertakes tough reforms.
Chinas National Bureau of Statistics reported that the nations Purchasing Managers Index was unchanged at 51.4 in November from a month earlier, which was an 18-month high, defying analysts projections for a decline to 51.1.
The better-than-expected reading was largely based on firm domestic and foreign demand. A gauge of output rose to 54.5 from 54.4 in October, while new export orders jumped to 50.6 from 50.4. An index measuring employment gained for a second month to 49.6, the strongest reading since March.
Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong, commented for Bloomberg: “This is good news for policy makers as the expected slowdown in growth appears pretty mild. As policy makers can be assured of growth over 7.5 percent, the attention is now firmly on reform.”
Chinas government has set a 7.5% growth target for this year, coinciding with the results of a Reuters poll of analysts for expansion in the fourth quarter. A separate survey conducted by Bloomberg News showed economists expected the Chinese economy to expand by 7.6% this year but growth will slow to 7.5% in 2014. Premier Li Keqiang said that Beijing needs an annual expansion of 7.2% to keep unemployment stable.
However, analysts warned against undue optimism. New orders growth decelerated to 52.3 from 52.5 a month earlier, while the production and business activity expectation sub-index fell to 54.9 from 57.5.
The report also showed that the PMI for large companies inched up to 52.4 from 52.3 in October, the highest in 19 months, while the measure for smaller companies slipped to 48.3 from 48.5.
Hu Yifan, chief economist at Haitong International Securities Group Ltd. in Hong Kong, said for Bloomberg: “It’s clear that the improvements are coming from the big enterprises and there’s little improvement in the structure of demand. Small companies will only recover when the overall macroeconomic situation recovers, once the economy starts to push from the bottom.”
Todays reading contrasted with a preliminary private report released earlier in the month which showed factory growth slowed in November. The HSBC Flash China Manufacturing PMI fell to 50.4, down from October’s final reading of 50.9 and below analysts’ expectations to post at 50.8.
The final reading is due to be released early on Monday. Unlike its official counterpart, it favors smaller and private companies.
Also fanning positive sentiment for the Chinese economic recovery, Standard and Poor’s confirmed China’s AA-/A-1+ sovereign credit rating with stable outlook and affirmed its Greater China regional scale rating at “cnAAA/cnA-1+”. China is the world’s top consumer of the metal and accounts for around 40% of global demand.
The agency said that the Asian country’s growth prospects, modest government indebtedness and strong net external asset position are key supportive factors for Beijing’s creditworthiness. These strengths offset some downsides such as reliance on direct administrative tools to manage the economy and restricted information flows.
“The stable outlook on the global scale long-term rating reflects our view that economic and political developments in the next two to three years are likely to support the rating,” Standard and Poor’s said.