Most of the headlines today are focused on a shrinking rate of growth in China’s manufacturing sector, the reality is it is continuing to expand.
China’s economy grew a faster-than-expected 6.9 percent in the first quarter, boosted by higher government infrastructure spending and the nation’s gravity-defying property boom.
But growth is expected to slow as authorities step up a battle to cool the property sector and as the central bank and banking regulator take steps to contain financial risks.
This is a planned move, not a signal of weakening.
China’s manufacturing sector continued to expand in April, though at a slower pace, said the National Bureau of Statistics (NBS) on Sunday.
The country’s manufacturing purchasing managers’ index (PMI) came in at 51.2 in April, lower than the 51.8 recorded in March, according to NBS data.
The reading fell short of market expectations but still stayed above the boom-bust line of 50 for the ninth straight month.
The slower expansion was in part due to sluggish growth in both market demand and supply, said NBS senior statistician Zhao Qinghe.
The sub-index for production stood at 53.8 in April while the sub-index for new orders came in at 52.3, both down from the level a month ago.
“While both the production and the new orders indices are still in the expansion territory, the gap between them has widened, which needs to be closely watched,” Zhao said.
The lower-than-expected expansion was also a result of contraction in the high energy-consuming industries, lower price at factory gate, and slower expansion in both imports and exports, Zhao said.
On a positive note, equipment manufacturing and high-tech manufacturing continued robust growth, with the sub-indices coming in at 52.1 and 53.4 respectively, well above the 51.2 registered for all manufacturing industries.
Consumer goods manufacturing also rose to 52.2, indicating an increasingly important role it plays in the economy, Zhao said.
Chinese steel and iron ore futures tumbled to multi-month lows earlier this month as market sentiment turned bearish on demand outlook and worries mounted about a glut of steel later this year.
The employment sub-index slipped to 49.2 from 50.0 in March while the raw materials inventories sub-index was unchanged at 48.3.
Growth in China’s services sector slowed slightly to 54.0 in April, compared with the previous month’s reading of 55.1, which was the highest since May 2014.