Manufacturing PMI swings to growth

China's manufacturing sector expanded in November for the first time in 13 months, a preliminary gauge of the country's manufacturing activity showed Thursday, reinforcing views that the recovery of the economy is stabilizing.

A flash reading of China's manufacturing Purchasing Managers' Index (PMI), a gauge of performance in the manufacturing industry, rose to 50.4 in November from a final reading of 49.5 in October, HSBC Holdings PLC said Thursday.

A PMI reading above 50 indicates growth, while a reading below 50 indicates contraction.

"HSBC manufacturing PMI bounced back to expansion territory for the first time in 13 months, confirming that the economic recovery continues to gain momentum toward the year end," said Qu Hongbin, HSBC's chief economist for China.

A sub-index, manufacturing output, rose to 51.3 in November, also the highest in 13 months and up from October's final reading of 48.2.

Among other sub-indexes, new export orders grew sharply although overall new orders slowed.

"The HSBC reading confirms our views that the economic recovery will continue throughout the fourth quarter and our forecast that the economy may grow 7.9 or 8 percent in the fourth quarter," Tang Jianwei, a researcher with the Bank of Communications in Shanghai, told the Global Times Thursday.

"Such a trend has already been reflected in a lot of economic data released in the past two months measuring both domestic and external demand," Tang said.

China's exports surged 11.6 percent year-on-year in October, the fastest growth in five months, while retail sales expanded by 14.5 percent year-on-year in October, hitting a seven-month high.

However, Qu from HSBC warned the economy is still in the early stages of recovery and global economic growth remains fragile.

"This calls for a continuation of policy easing to strengthen the recovery," Qu said.

"Although companies, especially export-oriented companies, have seen orders increase in the past two months due to rising demand in the Christmas shopping season, they are still struggling to make ends meet," Zhou Dewen, director of the Wenzhou Council for the Promotion of Small and Medium-sized Enterprises, told the Global Times Thursday.

"Their profit margin is narrowing and they are reluctant to sign long-term orders due to the continuous appreciation of the yuan and rising costs. Their plight calls for the government to continue to reduce taxes, interest rates and administrative fees to ease their burden," he said.

The final results of the HSBC PMI survey will be released on December 3 and those of a separate government-sponsored manufacturing PMI will be published on December 1.

The official PMI reading is usually stronger than the HSBC PMI as the official survey is more focused on large, State-owned firms and the latter on smaller, export-oriented firms.