November has witnessed better-than-expected growth in China’s manufacturing sector, with the purchasing managers index rising to 50.2 from 50.1 in October, sending positive signals to the economy amid lingering downward pressure.
Analyst expect that there would be new easing measures to be rolled out and implemented in early 2019 to boost the manufacturing industry.
50 is the boom-or-bust line that separates expansion or contraction. The indicator reflects a subtle difference compared with official figures released earlier. The official manufacturing PMI in November was 50, 0.2 percent lower than that in October, according to data earlier released by the NBS on Friday November 30.
As prices of bulk commodities drops and other factors at play, indices for purchasing prices of major raw materials and ex-work goods decreased to the lowest in 2018, according to Zhao Qinghe, senior statistician at NBS.
Sub-PMI measuring equipment and high-tech manufacturing increased by 0.6 and 0.1 percent to 50.5 and 51.7 month-on-month in November, respectively, according to the NBS.
The sub-index for measuring new orders slightly increased to 50.9 in November from 50.4 in October, whilst the sub-index of output prices fell to less than 49.8 in November, indicating downward pressure on profit yield, according to the data.
Rebound of the sub-index measuring new orders reflects that the demand side sees a recovery, which may be partly because the private sector has benefited from recent supportive policy. While due to trade spat, decline in new export orders continued in November, according to Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.
Though external challenges may have a negative impact on investors’ willingness to invest, supportive policies for boosting the economy will help cushion downward strains, according to analysts.
Manufacturing sector has been playing a critical role to help stabilize the economy in 2018, but may feel weight in 2019 as uncertainties on a global scale emerge, said Cheng Shi, chief economist of ICBC International.
Measures to support supply-side, such as tax cuts, may help the manufacturing sector to transform towards high-quality growth when such policies end, Cheng said.
The value-added tax reforms, under which tax applicable to manufacturing enterprises may be reduced from 16 to 14 percent, will knock at least 1 trillion yuan($145.1 billion) off the country’s tax revenues, he said.
There are worrying signs that economic growth will be slowing down in the fourth quarter, amid such worries, Chinese central government has released announcements on several occasions to improve laws and regulations to ensure a fair business environment and stabilize sustainable growth.