China's Caixin manufacturing PMI hits four-month high in July

Technical workers assemble engines at a plant in Yiwu, Zhejiang province.[Photo provided for China Daily]

BEIJING - China's manufacturing activity expanded at its fastest pace in four months in July on the back of economic stabilization, a private survey showed on Tuesday.

The Caixin China General Manufacturing Purchasing Managers' Index (PMI) stood at 51.1 for July, up from 50.4 in June, the highest level in four months, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media Co. Ltd.

A reading above 50 indicates expansion, while a reading below 50 represents contraction.

The Caixin data came after an official survey showed slightly slower growth in manufacturing activity in July. The National Bureau of Statistics (NBS) said Monday that China's official manufacturing PMI came in at 51.4 in July, down from 51.7 in June.
The official PMI samples 3,000 manufacturing enterprises in China. The Caixin PMI samples some 500 manufacturers and is relatively volatile due to its small sample size and less emphasis on large enterprises.

Caixin said the acceleration in July's manufacturing sector was a result of rising business activity, citing data that both output and new orders rose at the fastest rates in five months, helped by a solid upturn in new export sales.
"This signalled an improvement in the health of China's manufacturing sector for the second successive month," Caixin said in the survey report.

Companies surveyed by Caixin widely commented on an improvement in market conditions and strong foreign demand. Notably, new export sales increased at the second-fastest rate since September 2014, it said.

Official statistics put China's economic growth at 6.9 percent in the first two quarters of this year, up from 6.8 percent in the fourth quarter of 2016, beating market expectations.x In June, the country's industrial-production growth increased to 7.6 percent year-on-year, after staying at 6.5 percent in April and May, data from the NBS showed.

"Operating conditions in the manufacturing sector improved further in July, suggesting the economy's growth momentum will be sustained," said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group.
Given the stable momentum, it is unlikely that China's financial regulatory tightening will be relaxed, he predicted.
Caixin is set to release PMI for China's service sector on Thursday.

The official non-manufacturing PMI came in at 54.5 in July, down from 54.9 in June, according to the NBS.