A reading of 50.1 is not much of a boom. But after two months below the line, it was enough to change the headline. China’s official manufacturing purchasing managers’ index rose to 50.1 in September from 49.8 in August, according to National Bureau of Statistics data released on Wednesday, CNBC reported. Analysts polled by Reuters had expected exactly that number.
Anything above 50 signals growth, so factories are back on the right side of the divide, if only just. The bureau’s chief statistician, Huo Lihui, credited the improvement to faster activity in equipment and high-tech manufacturing, along with consumer industries.
Services and construction also improved
The wider picture was a little brighter. The non-manufacturing PMI climbed to 50.2, also back in expansion territory, as business activity picked up in services. Construction reached its highest level of the year.
Chinese manufacturers have leaned on the AI hardware boom. At home, though, weak consumer demand remains a worry, and higher energy costs linked to the Middle East war have been squeezing margins.
A stimulus package the day before
The data landed one day after Beijing’s top economic and financial policymakers announced targeted fiscal and monetary steps meant to cut borrowing costs and expand central bank credit. The finance ministry pledged mortgage subsidies for qualified home buyers. The People’s Bank of China raised the quota on a lending facility for banks, aimed at infrastructure projects and at sectors such as technology and small firms, and lowered that facility’s rate to help make housing cheaper.
The mortgage subsidy runs for one year. Goldman Sachs analysts noted that it is limited to first-time buyers of homes priced at 1.5 million yuan ($224,000) or less and no larger than 120 square meters. That could pull some first-home purchases forward and lift sales in the short term, they said, but the bank expects only a modest effect on overall growth. It called the package “more significant as a policy signal than as a near-term growth impulse.”
Economists at Nomura were blunter. “The new round of supportive measures is not sufficient to bolster growth,” they wrote, adding that the steps were too small to deal with the real barriers. Larry Hu, China economist at Macquarie, described a “mini stimulus” that would do “just enough” to reach this year’s growth target of 4.5%-5%.
Exports carry the load
Hu expects Beijing to move with less urgency on demand as long as exports hold up. That is a shaky bet. Few other engines have worked this year. Yet trading partners are increasingly uneasy about China’s surplus factory capacity and dependence on overseas buyers, while spending at home lags.
Hu projects real GDP growth of 4.4% and 4.7% in the last two quarters of the year, up from a three-year low of 4.3% in the second quarter. The September PMI, in other words, ends a short losing streak. It does not yet show that the slowdown has turned.
