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Leading Indicators Reveals an Upward Expectation for Chinese Economy

Submit Time:10-05-2018 | Zoom In | Zoom Out

Author: | Source:National Bureau of Statistics


Since 2018, faced with the complicated environment at home and abroad, people from all regions or departments have earnestly implemented the decisions and deployments made by the CPC Central Committee with Comrade Xi Jinping at its core. Specifically, they have upheld the overall principle of pursuing progress while ensuring stability, made continuous efforts to deepen the policy of reform and opening-up, and efficiently ignite the endogenous power and vigor. As shown by the performance of the purchasing managers' index (PMI), one of the leading indicators, over the period from January to March 2018, the Chinese economy continues the stable progress and holds an upward expectation as it was in last year.  

I. Three major indexes stay within a prosperous range and enterprises expand their production steadily.  

Since 2018, the manufacturing PMI, non-manufacturing business activity index and the comprehensive PMI output index have all stayed within the prosperous range, signaling that companies produce and operate well and continue their momentum for steady expansion. The manufacturing PMI has continued its robust momentum as it was in the past year. The index stood at 51.3%, 50.3% and 51.5 % this January, February and March, respectively. It has managed to maintain at least 50%—the threshold of prosperous range—for 20 consecutive months. A close look at these figures tells us that the manufacturing sector is making stable progress. The non-manufacturing business activity index reported 55.3%, 54.4% and 54.6% this January, February and March. It has stayed above 54%—a fairly high level—for seven months in a row. At the same time, the service sector has grown at a stably fast pace. The comprehensive PMI output index was 54.6%, 52.9% and 54.0% this January, February and March, respectively. Remaining at a fairly prosperous level, it has indicated that the real economy is steadily expanding its production and operating capacity overall.  

II. The composition of PMI gives hints that the industrial structure is upgrading and the supply quality is improving.  

This March, the manufacturing output index and the non-manufacturing business activity index, as two components of the comprehensive PMI output index, registered 53.1% and 54.6%, respectively, of which the latter index surpassed the former index by 1.5 percentage points. The non-manufacturing business aggregate continues to grow faster than the manufacturing output, marking that the Chinese industrial structure is further upgrading. A brief look into different sectors of the manufacturing industry reveals the following: equipment manufacturing, high-tech manufacturing and consumable manufacturing saw their PMI posting at 52.2%, 53.2% and 53.1% this March, surpassing that of entire manufacturing by 0.7, 1.7 and 1.6 percentage points, respectively. This indicates that as the supply-side structural reform keeps advancing, new growth drivers are emerging at a faster pace, the manufacturing industry is forging ahead toward the high end, and the supply quality is improving further. As far as the large non-manufacturing industry is concerned, the producer service sector and the logistics sector have developed fast, contributing a lot to the sustained and stable development of the real economy. The business activity index of the above two sectors stood at 61.7% and 58.4% this March, higher than that of the non-manufacturing industry by 7.1 and 3.8 percentage points and representing an increase of 13.9 and 16.1 percentage points over the previous month, respectively. The business activity index of such sectors as railway transport, postal and express delivery, telecommunications, internet and software, banking, securities, and insurance all stayed at least 55.0%—a fairly prosperous level, thus demonstrating a momentum of robust expansion.  

III. The trajectory of changes reveals that the three major indexes pick up obviously and hold an upward expectation for development.  

The manufacturing PMI increased 1.2 percentage points to 51.5% from this February to this March. It hit the highest level in Q1 of 2018, suggesting that the manufacturing industry expands at a faster pace and demonstrates a momentum of stable rise. As most companies resumed production after the Spring Festival holiday, their production and operating activities grew faster, with the production index and the new order index standing at 53.1% and 53.3%, up 2.4 and 2.3 percentage points over the previous month. The new order index has surpassed the production index for two consecutive months, showing the endogenous power of the manufacturing industry is becoming ever-stronger. The new export order index and the new import order index went up by 2.3 and 1.5 percentage points over the last month to 51.3% both. Their return to the range of expansion indicates that import and export activities are becoming more active. A look at the non-manufacturing business activity index suggests that the non-manufacturing business activity index reached 54.6% this March, up 0.2 percentage point over the last month. As a result, the non-manufacturing industry has overall continued the stably fast operation. The service sector reported the business activity index at 53.6%, down 0.2 percentage point over the last month but still higher than the average level of the last year. As the weather warms up and infrastructure construction gathers its pace, the rate of operation for construction projects grew remarkably, and the business activity index of the construction industry went up by 3.2 percentage points to 60.7%, 0.2 percentage point higher than the same period of the last year. It has come back to the prosperous range. The new order index and the new export order index of the construction industry rose by 2.5 and 7.9 percentage points from the last month to 52.0% and 59.6%, of which the new order index has reached the highest level in recent years and indicates that the construction industry has recently produced a rising demand at home and broad. The comprehensive PMI output index was 54.0% this March, up 1.1 percentage points over the last month. The trend shows that the Chinese enterprises are steadily expanding their production and operating capacity.  

Overall, the PMI performance in Q1 of 2018 attests that the Chinese economy is maintaining its momentum for stable progress and holding an upward expectation. More favorable conditions emerge to propel the Chinese economy toward high-quality development, and make a good start for its stable, sound operation throughout the year. For the phase ahead, spearheaded by the core message of the 19th CPC National Congress, China will continue to implement the decisions and deployments made by the CPC Central Committee and the State Council. While upholding the overall principle for seeking progress while ensuring stability and consolidating the foundations for the upward economic performance, we will take into account the long economic cycle and the structural upgrading to deepen our efforts in reform and innovation. By invigorating the economy with reform and creating new growth drivers with innovation, we will make constant endeavors to improve the quality and efficiency of economic development, do everything to maintain the continuous improvement in the real economy, and realize the stable, sound economic development in the long run.  

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