China's Manufacturers Register Better-Than-Expected Rise in Output

The latest Purchasing Managers’ Index from the National Bureau of Statistics and China Federation of Logistics and Purchasing suggest that China's economic recovery is sustaining momentum. The PMI was 51.4, while a separate gauge from HSBC Holdings Plc and Markit Economics was 50.8. Numbers above 50 signal expansion. 


The latest PMI was the same reading as October, which was an 18-month high. The median estimate was 51.1, with projections ranging from 50.8 to 51.5.


Stability in manufacturing in the world’s second-biggest economy may give Premier Li Keqiang more room to implement policy changes laid out after a Communist Party meeting last month, reports Bloomberg.


The PMI for large companies rose to 52.4 from 52.3 in October, the highest level in 19 months, while the gauge for small companies slid to 48.3 from 48.5, the statistics bureau said.


“It’s clear that the improvements are coming from the big enterprises and there’s little improvement in the structure” of demand, said Hu Yifan, chief economist at Haitong International Securities Group Ltd. in Hong Kong. “Small companies will only recover when the overall macroeconomic situation recovers, once the economy starts to push from the bottom.”


Meanwhile, companies’ borrowing costs are rising as money-market interest rates increase amid the central bank’s efforts to rein in credit growth. The seven-day repurchase rate, a gauge of funding availability in the banking system, averaged 4.54 percent in November, up from an average 3.57 percent in May.


“The rising funding costs will eventually be passed on to the corporates, discouraging further investment expansion,” Liu Li-Gang and Zhou Hao, China economists at Australia & New Zealand Banking Group Ltd., wrote in a report obtained by Bloomberg.