Asia Economy

China HSBC PMI shows economic recovery intact

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China's manufacturing sector picked up further steam in September, a preliminary survey of factory managers showed on Monday, a sign that the country's economic recovery is gaining traction.

The HSBC flash Purchasing Managers' Index (PMI) hit a six-month high of 51.2, from a final reading of 50.1 in August, moving further above the key 50 mark that divides expanding activity in the sector from a contraction.

"The HSBC Flash China Manufacturing PMI [adds] further evidence to China's ongoing growth rebound. The firmer footing was supported by simultaneous improvements of external and domestic demand condition," said Hongbin Qu, chief China economist and co-head of the Asian economic research team at HSBC.

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"We expect a more sustained recovery as the further filtering-through of fine-tuning measures should lift domestic demand. This will create more favorable conditions to push forward reforms, which should in turn boost mid- and long-term growth outlooks," he added.

The new export orders sub-index rose to a ten-month high of 50.8, up from August's 47.2, reflecting a pick-up in external demand for the country's goods.

HSBC PMI confirms China recovery: Expert
HSBC PMI confirms China recovery: Expert

Meanwhile, stocks of raw material purchases and finished goods also rose, which suggests that inventory restocking is also a driver of the recovery, according to economists.

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The improvement in HSBC's manufacturing survey – which is weighted towards small and medium-sized companies – follows a jump in the official PMI reading to 51.0 in August from 50.3 in July.

Positive economic data out of the world's second largest economy has raised expectations of a growth rebound in the third quarter, from the previous three months.

"[The data] supports our call that there has been a strong sequential economic rebound since late July. We expect headline year-on-year GDP growth could jump to 7.9 percent in the third quarter from 7.5 percent in the second quarter," said Ting Lu, China economist at Bank of America Merrill Lynch.